Correlation Between Saat Moderate and Invesco Gold

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

By analyzing existing cross correlation between Saat Moderate Strategy and Invesco Gold Special, you can compare the effects of market volatilities on Saat Moderate and Invesco 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 Saat Moderate with a short position of Invesco Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saat Moderate and Invesco Gold.

Diversification Opportunities for Saat Moderate and Invesco Gold

0.85

Correlation Coefficient

Saat Moderate  Invesco Gold

Very poor diversification

The 3 months correlation between Saat and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Saat Moderate Strategy and Invesco Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Gold Special and Saat Moderate 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 Saat Moderate Strategy are associated (or correlated) with Invesco Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Gold Special has no effect on the direction of Saat Moderate i.e., Saat Moderate and Invesco Gold go up and down completely randomly.

Pair Corralation between Saat Moderate and Invesco Gold

Assuming the 90 days horizon Saat Moderate is expected to generate 9.06 times less return on investment than Invesco Gold. But when comparing it to its historical volatility, Saat Moderate Strategy is 6.05 times less risky than Invesco Gold. It trades about 0.18 of its potential returns per unit of risk. Invesco Gold Special is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,561  in Invesco Gold Special on December 29, 2024 and sell it today you would earn a total of  732.00  from holding Invesco Gold Special or generate 28.58% return on investment over 90 days.

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

Saat Moderate Strategy  vs.  Invesco Gold Special

Saat Moderate Strategy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saat Moderate Strategy are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Saat Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Gold Special

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Saat Moderate and Invesco Gold

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

The idea behind Saat Moderate Strategy and Invesco Gold Special 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.