Correlation Between VanEck Gold and United States

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

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

Diversification Opportunities for VanEck Gold and United States

0.71

Correlation Coefficient

VanEck Gold  United States

Poor diversification

The 3 months correlation between VanEck and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gold Miners and United States Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Natural and VanEck Gold 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 VanEck Gold Miners are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Natural has no effect on the direction of VanEck Gold i.e., VanEck Gold and United States go up and down completely randomly.

Pair Corralation between VanEck Gold and United States

Considering the 90-day investment horizon VanEck Gold Miners is expected to generate 0.4 times more return on investment than United States. However, VanEck Gold Miners is 2.49 times less risky than United States. It trades about 0.3 of its potential returns per unit of risk. United States Natural is currently generating about 0.07 per unit of risk. If you would invest  3,377  in VanEck Gold Miners on December 28, 2024 and sell it today you would earn a total of  1,199  from holding VanEck Gold Miners or generate 35.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

VanEck Gold Miners  vs.  United States Natural

VanEck Gold Miners

Risk-Adjusted Performance

Solid

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

United States Natural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United States Natural are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Gold and United States

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

The idea behind VanEck Gold Miners and United States Natural 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.