Correlation Between Capital Growth and Precious Metals

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

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

Diversification Opportunities for Capital Growth and Precious Metals

0.62

Correlation Coefficient

Capital Growth  Precious Metals

Poor diversification

The 3 months correlation between Capital and Precious is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund 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 Capital Growth 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 Capital Growth Fund 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 Capital Growth i.e., Capital Growth and Precious Metals go up and down completely randomly.

Pair Corralation between Capital Growth and Precious Metals

Assuming the 90 days horizon Capital Growth Fund is expected to under-perform the Precious Metals. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital Growth Fund is 1.25 times less risky than Precious Metals. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Precious Metals And is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,160  in Precious Metals And on October 10, 2024 and sell it today you would lose (217.00) from holding Precious Metals And or give up 10.05% of portfolio value over 90 days.

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

Capital Growth Fund  vs.  Precious Metals And

Capital Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Growth Fund 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 technical and fundamental 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.

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Capital Growth and Precious Metals

The main advantage of trading using opposite Capital Growth and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth 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 Capital Growth Fund 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..