Correlation Between Precious Metals and Technology Ultrasector

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

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

Diversification Opportunities for Precious Metals and Technology Ultrasector

-0.1

Correlation Coefficient

Precious Metals  Technology Ultrasector

Good diversification

The 3 months correlation between Precious and Technology is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Ultrasector and Technology Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Ultrasector and Precious Metals 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 Precious Metals Ultrasector are associated (or correlated) with Technology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Ultrasector has no effect on the direction of Precious Metals i.e., Precious Metals and Technology Ultrasector go up and down completely randomly.

Pair Corralation between Precious Metals and Technology Ultrasector

Assuming the 90 days horizon Precious Metals Ultrasector is expected to under-perform the Technology Ultrasector. In addition to that, Precious Metals is 1.35 times more volatile than Technology Ultrasector Profund. It trades about -0.09 of its total potential returns per unit of risk. Technology Ultrasector Profund is currently generating about -0.03 per unit of volatility. If you would invest  4,014  in Technology Ultrasector Profund on October 9, 2024 and sell it today you would lose (216.00) from holding Technology Ultrasector Profund or give up 5.38% of portfolio value over 90 days.

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

Precious Metals Ultrasector  vs.  Technology Ultrasector Profund

Precious Metals Ultr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Technology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Precious Metals and Technology Ultrasector

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

The idea behind Precious Metals Ultrasector and Technology Ultrasector Profund 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.