Correlation Between Utilities Portfolio and Gold Portfolio

Can any of the company-specific risk be diversified away by investing in both Utilities Portfolio and Gold Portfolio 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 Utilities Portfolio and Gold Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Utilities Portfolio Utilities and Gold Portfolio Gold, you can compare the effects of market volatilities on Utilities Portfolio and Gold Portfolio 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 Utilities Portfolio with a short position of Gold Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Portfolio and Gold Portfolio.

Diversification Opportunities for Utilities Portfolio and Gold Portfolio

0.33

Correlation Coefficient

Utilities Portfolio  Gold Portfolio

Weak diversification

The 3 months correlation between Utilities and Gold is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Portfolio Utilities and Gold Portfolio Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Gold and Utilities 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 Utilities Portfolio Utilities are associated (or correlated) with Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Gold has no effect on the direction of Utilities Portfolio i.e., Utilities Portfolio and Gold Portfolio go up and down completely randomly.

Pair Corralation between Utilities Portfolio and Gold Portfolio

Assuming the 90 days horizon Utilities Portfolio Utilities is expected to generate 0.54 times more return on investment than Gold Portfolio. However, Utilities Portfolio Utilities is 1.84 times less risky than Gold Portfolio. It trades about 0.0 of its potential returns per unit of risk. Gold Portfolio Gold is currently generating about -0.12 per unit of risk. If you would invest  12,378  in Utilities Portfolio Utilities on October 7, 2024 and sell it today you would lose (18.00) from holding Utilities Portfolio Utilities or give up 0.15% of portfolio value over 90 days.

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

Utilities Portfolio Utilities  vs.  Gold Portfolio Gold

Utilities Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gold Portfolio Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Portfolio Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Utilities Portfolio and Gold Portfolio

The main advantage of trading using opposite Utilities Portfolio and Gold Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Portfolio position performs unexpectedly, Gold Portfolio 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 Gold Portfolio will offset losses from the drop in Gold Portfolio's long position.

The idea behind Utilities Portfolio Utilities and Gold Portfolio Gold 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.