Correlation Between Short Precious and Banking Fund

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

By analyzing existing cross correlation between Short Precious Metals and Banking Fund Class, you can compare the effects of market volatilities on Short Precious and Banking 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 Short Precious with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Precious and Banking Fund.

Diversification Opportunities for Short Precious and Banking Fund

0.63

Correlation Coefficient

Short Precious  Banking Fund

Poor diversification

The 3 months correlation between Short and Banking is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class and Short Precious 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 Short Precious Metals are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Short Precious i.e., Short Precious and Banking Fund go up and down completely randomly.

Pair Corralation between Short Precious and Banking Fund

Assuming the 90 days horizon Short Precious is expected to generate 1.54 times less return on investment than Banking Fund. In addition to that, Short Precious is 1.06 times more volatile than Banking Fund Class. It trades about 0.06 of its total potential returns per unit of risk. Banking Fund Class is currently generating about 0.09 per unit of volatility. If you would invest  8,516  in Banking Fund Class on September 14, 2024 and sell it today you would earn a total of  854.00  from holding Banking Fund Class or generate 10.03% return on investment over 90 days.

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

Short Precious Metals  vs.  Banking Fund Class

Short Precious Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Short Precious Metals are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Precious may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Banking Fund Class

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banking Fund Class are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Banking Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Short Precious and Banking Fund

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

The idea behind Short Precious Metals and Banking Fund Class 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.