Correlation Between Gold Bullion and Deutsche Gold

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

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

Diversification Opportunities for Gold Bullion and Deutsche Gold

0.92

Correlation Coefficient

Gold Bullion  Deutsche Gold

Almost no diversification

The 3 months correlation between Gold and Deutsche is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Deutsche Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Gold Precious and Gold Bullion 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 The Gold Bullion are associated (or correlated) with Deutsche Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Gold Precious has no effect on the direction of Gold Bullion i.e., Gold Bullion and Deutsche Gold go up and down completely randomly.

Pair Corralation between Gold Bullion and Deutsche Gold

Assuming the 90 days horizon Gold Bullion is expected to generate 1.5 times less return on investment than Deutsche Gold. But when comparing it to its historical volatility, The Gold Bullion is 1.84 times less risky than Deutsche Gold. It trades about 0.28 of its potential returns per unit of risk. Deutsche Gold Precious is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,260  in Deutsche Gold Precious on December 20, 2024 and sell it today you would earn a total of  1,221  from holding Deutsche Gold Precious or generate 23.21% return on investment over 90 days.

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

The Gold Bullion  vs.  Deutsche Gold Precious

Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Gold Bullion showed solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Gold Precious

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Gold Precious are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Deutsche Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Bullion and Deutsche Gold

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

The idea behind The Gold Bullion and Deutsche Gold Precious 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..