Correlation Between Highway 50 and Precious Metals

Can any of the company-specific risk be diversified away by investing in both Highway 50 and Precious Metals 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 Highway 50 and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highway 50 Gold and Precious Metals And, you can compare the effects of market volatilities on Highway 50 and Precious Metals 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 Highway 50 with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway 50 and Precious Metals.

Diversification Opportunities for Highway 50 and Precious Metals

0.59

Correlation Coefficient

Highway 50  Precious Metals

Very weak diversification

The 3 months correlation between Highway and Precious is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Highway 50 Gold and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And and Highway 50 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 Highway 50 Gold are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of Highway 50 i.e., Highway 50 and Precious Metals go up and down completely randomly.

Pair Corralation between Highway 50 and Precious Metals

Assuming the 90 days horizon Highway 50 Gold is expected to generate 1.52 times more return on investment than Precious Metals. However, Highway 50 is 1.52 times more volatile than Precious Metals And. It trades about 0.24 of its potential returns per unit of risk. Precious Metals And is currently generating about 0.16 per unit of risk. If you would invest  13.00  in Highway 50 Gold on October 22, 2024 and sell it today you would earn a total of  1.00  from holding Highway 50 Gold or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Highway 50 Gold  vs.  Precious Metals And

Highway 50 Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highway 50 Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highway 50 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Precious Metals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highway 50 and Precious Metals

The main advantage of trading using opposite Highway 50 and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway 50 position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.

The idea behind Highway 50 Gold and Precious Metals And 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 Transaction History module to view history of all your transactions and understand their impact on performance.