Correlation Between Swan Defined and Gold Bullion

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

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

Diversification Opportunities for Swan Defined and Gold Bullion

-0.53

Correlation Coefficient

Swan Defined  Gold Bullion

Excellent diversification

The 3 months correlation between Swan and Gold is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Swan Defined i.e., Swan Defined and Gold Bullion go up and down completely randomly.

Pair Corralation between Swan Defined and Gold Bullion

Assuming the 90 days horizon Swan Defined Risk is expected to under-perform the Gold Bullion. In addition to that, Swan Defined is 5.13 times more volatile than The Gold Bullion. It trades about -0.14 of its total potential returns per unit of risk. The Gold Bullion is currently generating about 0.24 per unit of volatility. If you would invest  2,044  in The Gold Bullion on December 20, 2024 and sell it today you would earn a total of  280.00  from holding The Gold Bullion or generate 13.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.44%
Values	Daily Returns

Swan Defined Risk  vs.  The Gold Bullion

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swan Defined Risk 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 forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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 19 (%) 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.

Pair Trading with Swan Defined and Gold Bullion

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

The idea behind Swan Defined Risk and The Gold Bullion 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.