Correlation Between The Gold and Precious Metals

Can any of the company-specific risk be diversified away by investing in both The Gold and Precious Metals 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 The Gold and Precious Metals 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 Precious Metals And, you can compare the effects of market volatilities on The Gold and Precious Metals 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 The Gold with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Gold and Precious Metals.

Diversification Opportunities for The Gold and Precious Metals

0.64

Correlation Coefficient

The Gold  Precious Metals

Poor diversification

The 3 months correlation between The and Precious is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And and The Gold 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of The Gold i.e., The Gold and Precious Metals go up and down completely randomly.

Pair Corralation between The Gold and Precious Metals

Assuming the 90 days horizon The Gold Bullion is expected to under-perform the Precious Metals. In addition to that, The Gold is 1.79 times more volatile than Precious Metals And. It trades about -0.17 of its total potential returns per unit of risk. Precious Metals And is currently generating about -0.12 per unit of volatility. If you would invest  2,189  in Precious Metals And on October 9, 2024 and sell it today you would lose (199.00) from holding Precious Metals And or give up 9.09% of portfolio value over 90 days.

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

The Gold Bullion  vs.  Precious Metals And

Gold Bullion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gold Bullion 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 fundamental 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.

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with The Gold and Precious Metals

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

The idea behind The Gold Bullion and Precious Metals And 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.