Correlation Between Precious Metals and Unconstrained Bond

Can any of the company-specific risk be diversified away by investing in both Precious Metals and Unconstrained Bond 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 Unconstrained Bond 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 Unconstrained Bond Series, you can compare the effects of market volatilities on Precious Metals and Unconstrained Bond 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 Unconstrained Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Unconstrained Bond.

Diversification Opportunities for Precious Metals and Unconstrained Bond

0.36

Correlation Coefficient

Precious Metals  Unconstrained Bond

Weak diversification

The 3 months correlation between Precious and Unconstrained is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Unconstrained Bond Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unconstrained Bond Series 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 Unconstrained Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unconstrained Bond Series has no effect on the direction of Precious Metals i.e., Precious Metals and Unconstrained Bond go up and down completely randomly.

Pair Corralation between Precious Metals and Unconstrained Bond

Assuming the 90 days horizon Precious Metals And is expected to under-perform the Unconstrained Bond. In addition to that, Precious Metals is 12.74 times more volatile than Unconstrained Bond Series. It trades about -0.01 of its total potential returns per unit of risk. Unconstrained Bond Series is currently generating about -0.07 per unit of volatility. If you would invest  995.00  in Unconstrained Bond Series on September 13, 2024 and sell it today you would lose (6.00) from holding Unconstrained Bond Series or give up 0.6% of portfolio value over 90 days.

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

Precious Metals And  vs.  Unconstrained Bond Series

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 fairly strong primary indicators, Precious Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Unconstrained Bond Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unconstrained Bond Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Unconstrained Bond 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 Unconstrained Bond

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

The idea behind Precious Metals And and Unconstrained Bond Series 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.