Correlation Between Precious Metals and Electronics Fund

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

By analyzing existing cross correlation between Precious Metals Fund and Electronics Fund Investor, you can compare the effects of market volatilities on Precious Metals and Electronics Fund 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 Electronics Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Electronics Fund.

Diversification Opportunities for Precious Metals and Electronics Fund

-0.17

Correlation Coefficient

Precious Metals  Electronics Fund

Good diversification

The 3 months correlation between Precious and Electronics is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Fund and Electronics Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Fund Investor 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 Fund are associated (or correlated) with Electronics Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Fund Investor has no effect on the direction of Precious Metals i.e., Precious Metals and Electronics Fund go up and down completely randomly.

Pair Corralation between Precious Metals and Electronics Fund

Assuming the 90 days horizon Precious Metals Fund is expected to generate 17.77 times more return on investment than Electronics Fund. However, Precious Metals is 17.77 times more volatile than Electronics Fund Investor. It trades about 0.15 of its potential returns per unit of risk. Electronics Fund Investor is currently generating about 0.0 per unit of risk. If you would invest  4,135  in Precious Metals Fund on November 29, 2024 and sell it today you would earn a total of  9,006  from holding Precious Metals Fund or generate 217.8% return on investment over 90 days.

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

Precious Metals Fund  vs.  Electronics Fund Investor

Precious Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Precious Metals Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Precious Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Electronics Fund Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electronics Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Electronics Fund 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 Electronics Fund

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

The idea behind Precious Metals Fund and Electronics Fund Investor 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.