Correlation Between Natural Gas and Gold Futures
Can any of the company-specific risk be diversified away by investing in both Natural Gas and Gold Futures 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 Natural Gas and Gold Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas and Gold Futures, you can compare the effects of market volatilities on Natural Gas and Gold Futures 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 Natural Gas with a short position of Gold Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and Gold Futures.
Diversification Opportunities for Natural Gas and Gold Futures
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Natural and Gold is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures and Natural Gas 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 Natural Gas are associated (or correlated) with Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of Natural Gas i.e., Natural Gas and Gold Futures go up and down completely randomly.
Pair Corralation between Natural Gas and Gold Futures
Assuming the 90 days horizon Natural Gas is expected to generate 2.59 times less return on investment than Gold Futures. In addition to that, Natural Gas is 5.38 times more volatile than Gold Futures. It trades about 0.02 of its total potential returns per unit of risk. Gold Futures is currently generating about 0.29 per unit of volatility. If you would invest 261,810 in Gold Futures on December 28, 2024 and sell it today you would earn a total of 45,090 from holding Gold Futures or generate 17.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Natural Gas vs. Gold Futures
Performance |
Timeline |
Natural Gas |
Gold Futures |
Natural Gas and Gold Futures Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Natural Gas and Gold Futures
The main advantage of trading using opposite Natural Gas and Gold Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, Gold Futures 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 Futures will offset losses from the drop in Gold Futures' long position.Natural Gas vs. Micro Silver Futures | Natural Gas vs. Rough Rice Futures | Natural Gas vs. 30 Day Fed | Natural Gas vs. Brent Crude Oil |
Gold Futures vs. US Dollar | Gold Futures vs. Five Year Treasury Note | Gold Futures vs. Live Cattle Futures | Gold Futures vs. Cotton |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |