Correlation Between Precious Metals and Ultrashort Small

Can any of the company-specific risk be diversified away by investing in both Precious Metals and Ultrashort Small 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 Ultrashort Small 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 Ultrashort Small Cap Profund, you can compare the effects of market volatilities on Precious Metals and Ultrashort Small 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 Ultrashort Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Ultrashort Small.

Diversification Opportunities for Precious Metals and Ultrashort Small

0.49

Correlation Coefficient

Precious Metals  Ultrashort Small

Very weak diversification

The 3 months correlation between Precious and Ultrashort is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Ultrasector and Ultrashort Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Small Cap 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 Ultrashort Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Small Cap has no effect on the direction of Precious Metals i.e., Precious Metals and Ultrashort Small go up and down completely randomly.

Pair Corralation between Precious Metals and Ultrashort Small

Assuming the 90 days horizon Precious Metals Ultrasector is expected to under-perform the Ultrashort Small. In addition to that, Precious Metals is 1.17 times more volatile than Ultrashort Small Cap Profund. It trades about -0.19 of its total potential returns per unit of risk. Ultrashort Small Cap Profund is currently generating about 0.32 per unit of volatility. If you would invest  3,661  in Ultrashort Small Cap Profund on September 30, 2024 and sell it today you would earn a total of  609.00  from holding Ultrashort Small Cap Profund or generate 16.63% return on investment over 90 days.

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

Precious Metals Ultrasector  vs.  Ultrashort Small Cap 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ultrashort Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Small Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ultrashort Small 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 Ultrashort Small

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

The idea behind Precious Metals Ultrasector and Ultrashort Small Cap 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.