Correlation Between Multi Units and Gold Bullion

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

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

Diversification Opportunities for Multi Units and Gold Bullion

0.76

Correlation Coefficient

Multi Units  Gold Bullion

Poor diversification

The 3 months correlation between Multi and Gold is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg and Gold Bullion Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion Securities and Multi Units 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 Multi Units Luxembourg 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 Securities has no effect on the direction of Multi Units i.e., Multi Units and Gold Bullion go up and down completely randomly.

Pair Corralation between Multi Units and Gold Bullion

Assuming the 90 days trading horizon Multi Units Luxembourg is expected to generate 0.87 times more return on investment than Gold Bullion. However, Multi Units Luxembourg is 1.15 times less risky than Gold Bullion. It trades about 0.28 of its potential returns per unit of risk. Gold Bullion Securities is currently generating about 0.18 per unit of risk. If you would invest  5,135  in Multi Units Luxembourg on September 12, 2024 and sell it today you would earn a total of  757.00  from holding Multi Units Luxembourg or generate 14.74% return on investment over 90 days.

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

Multi Units Luxembourg  vs.  Gold Bullion Securities

Multi Units Luxembourg

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Multi Units sustained solid returns over the last few months and may actually be approaching a breakup point.

Gold Bullion Securities

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Bullion Securities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bullion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Multi Units and Gold Bullion

The main advantage of trading using opposite Multi Units and Gold Bullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Units 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 Multi Units Luxembourg and Gold Bullion Securities 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.