Correlation Between The Gold and Investec Emerging

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

Diversification Opportunities for The Gold and Investec Emerging

0.41

Correlation Coefficient

The Gold  Investec Emerging

Very weak diversification

The 3 months correlation between The and Investec is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Investec Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Emerging Markets 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 Investec Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Emerging Markets has no effect on the direction of The Gold i.e., The Gold and Investec Emerging go up and down completely randomly.

Pair Corralation between The Gold and Investec Emerging

Assuming the 90 days horizon The Gold Bullion is expected to generate 0.99 times more return on investment than Investec Emerging. However, The Gold Bullion is 1.01 times less risky than Investec Emerging. It trades about 0.32 of its potential returns per unit of risk. Investec Emerging Markets is currently generating about -0.01 per unit of risk. If you would invest  2,032  in The Gold Bullion on October 23, 2024 and sell it today you would earn a total of  95.00  from holding The Gold Bullion or generate 4.68% return on investment over 90 days.

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

The Gold Bullion  vs.  Investec Emerging Markets

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 fairly strong fundamental indicators, The Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Investec Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Investec 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 The Gold and Investec Emerging

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

The idea behind The Gold Bullion and Investec 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.