Correlation Between Purpose Gold and Global X

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

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

Diversification Opportunities for Purpose Gold and Global X

-0.61

Correlation Coefficient

Purpose Gold  Global X

Excellent diversification

The 3 months correlation between Purpose and Global is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Gold Bullion and Global X Crude in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Crude and Purpose 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 Purpose Gold Bullion are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Crude has no effect on the direction of Purpose Gold i.e., Purpose Gold and Global X go up and down completely randomly.

Pair Corralation between Purpose Gold and Global X

Assuming the 90 days trading horizon Purpose Gold Bullion is expected to generate 0.75 times more return on investment than Global X. However, Purpose Gold Bullion is 1.33 times less risky than Global X. It trades about 0.32 of its potential returns per unit of risk. Global X Crude is currently generating about -0.03 per unit of risk. If you would invest  3,843  in Purpose Gold Bullion on December 30, 2024 and sell it today you would earn a total of  684.00  from holding Purpose Gold Bullion or generate 17.8% return on investment over 90 days.

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

Purpose Gold Bullion  vs.  Global X Crude

Purpose Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Gold Bullion are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Purpose Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Crude

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Crude has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Purpose Gold and Global X

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

The idea behind Purpose Gold Bullion and Global X Crude 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.