Correlation Between Strategic Allocation: and Precious Metals

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

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

Diversification Opportunities for Strategic Allocation: and Precious Metals

0.14

Correlation Coefficient

Strategic Allocation:  Precious Metals

Average diversification

The 3 months correlation between Strategic and Precious is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And and Strategic Allocation: 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 Strategic Allocation Moderate are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Precious Metals go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Precious Metals

Assuming the 90 days horizon Strategic Allocation: is expected to generate 55.57 times less return on investment than Precious Metals. But when comparing it to its historical volatility, Strategic Allocation Moderate is 2.47 times less risky than Precious Metals. It trades about 0.02 of its potential returns per unit of risk. Precious Metals And is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,920  in Precious Metals And on December 28, 2024 and sell it today you would earn a total of  719.00  from holding Precious Metals And or generate 37.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Strategic Allocation Moderate  vs.  Precious Metals And

Strategic Allocation:

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Moderate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Strategic Allocation: is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Precious Metals And

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Precious Metals And are ranked lower than 28 (%) 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.

Pair Trading with Strategic Allocation: and Precious Metals

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

The idea behind Strategic Allocation Moderate and Precious Metals And 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.

Check out your portfolio center.

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.