Correlation Between Precious Metals and Equity Growth

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

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

Diversification Opportunities for Precious Metals and Equity Growth

-0.55

Correlation Coefficient

Precious Metals  Equity Growth

Excellent diversification

The 3 months correlation between Precious and Equity is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth and Precious Metals 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 Precious Metals And are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Precious Metals i.e., Precious Metals and Equity Growth go up and down completely randomly.

Pair Corralation between Precious Metals and Equity Growth

Assuming the 90 days horizon Precious Metals is expected to generate 61.12 times less return on investment than Equity Growth. But when comparing it to its historical volatility, Precious Metals And is 26.63 times less risky than Equity Growth. It trades about 0.02 of its potential returns per unit of risk. Equity Growth Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,252  in Equity Growth Fund on October 4, 2024 and sell it today you would earn a total of  1,113  from holding Equity Growth Fund or generate 49.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Precious Metals And  vs.  Equity Growth Fund

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And 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 primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Equity Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Growth Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Equity Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Precious Metals and Equity Growth

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

The idea behind Precious Metals And and Equity Growth Fund 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.