Correlation Between Precious Metals and Ultrashort Emerging

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

Diversification Opportunities for Precious Metals and Ultrashort Emerging

-0.61

Correlation Coefficient

Precious Metals  Ultrashort Emerging

Excellent diversification

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

Pair Corralation between Precious Metals and Ultrashort Emerging

Assuming the 90 days horizon Precious Metals Ultrasector is expected to under-perform the Ultrashort Emerging. In addition to that, Precious Metals is 1.09 times more volatile than Ultrashort Emerging Markets. It trades about -0.13 of its total potential returns per unit of risk. Ultrashort Emerging Markets is currently generating about 0.02 per unit of volatility. If you would invest  1,368  in Ultrashort Emerging Markets on September 21, 2024 and sell it today you would earn a total of  12.00  from holding Ultrashort Emerging Markets or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Precious Metals Ultrasector  vs.  Ultrashort Emerging Markets

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 Emerging

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Emerging Markets are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultrashort Emerging 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 Emerging

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

The idea behind Precious Metals Ultrasector and Ultrashort Emerging Markets 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.