Correlation Between Gold Portfolio and Vanguard Energy

Can any of the company-specific risk be diversified away by investing in both Gold Portfolio and Vanguard Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gold Portfolio and Vanguard Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gold Portfolio Gold and Vanguard Energy Fund, you can compare the effects of market volatilities on Gold Portfolio and Vanguard Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gold Portfolio with a short position of Vanguard Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Portfolio and Vanguard Energy.

Diversification Opportunities for Gold Portfolio and Vanguard Energy

0.14

Correlation Coefficient

Gold Portfolio  Vanguard Energy

Average diversification

The 3 months correlation between Gold and Vanguard is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gold Portfolio Gold and Vanguard Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy and Gold Portfolio is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gold Portfolio Gold are associated (or correlated) with Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy has no effect on the direction of Gold Portfolio i.e., Gold Portfolio and Vanguard Energy go up and down completely randomly.

Pair Corralation between Gold Portfolio and Vanguard Energy

Assuming the 90 days horizon Gold Portfolio Gold is expected to generate 1.04 times more return on investment than Vanguard Energy. However, Gold Portfolio is 1.04 times more volatile than Vanguard Energy Fund. It trades about 0.29 of its potential returns per unit of risk. Vanguard Energy Fund is currently generating about -0.01 per unit of risk. If you would invest  2,480  in Gold Portfolio Gold on December 26, 2024 and sell it today you would earn a total of  775.00  from holding Gold Portfolio Gold or generate 31.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gold Portfolio Gold  vs.  Vanguard Energy Fund

Gold Portfolio Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Portfolio Gold are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Gold Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gold Portfolio and Vanguard Energy

The main advantage of trading using opposite Gold Portfolio and Vanguard Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Portfolio position performs unexpectedly, Vanguard Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Energy will offset losses from the drop in Vanguard Energy's long position.

The idea behind Gold Portfolio Gold and Vanguard Energy Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.