Correlation Between Gold And and Inflation-linked

Can any of the company-specific risk be diversified away by investing in both Gold And and Inflation-linked 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 Gold And and Inflation-linked into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gold And Precious and Inflation Linked Fixed Income, you can compare the effects of market volatilities on Gold And and Inflation-linked 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 Gold And with a short position of Inflation-linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold And and Inflation-linked.

Diversification Opportunities for Gold And and Inflation-linked

0.5

Correlation Coefficient

Gold And  Inflation-linked

Very weak diversification

The 3 months correlation between Gold and Inflation-linked is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and Inflation Linked Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Linked Fixed and Gold And 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 Gold And Precious are associated (or correlated) with Inflation-linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Linked Fixed has no effect on the direction of Gold And i.e., Gold And and Inflation-linked go up and down completely randomly.

Pair Corralation between Gold And and Inflation-linked

Assuming the 90 days horizon Gold And Precious is expected to generate 4.58 times more return on investment than Inflation-linked. However, Gold And is 4.58 times more volatile than Inflation Linked Fixed Income. It trades about 0.04 of its potential returns per unit of risk. Inflation Linked Fixed Income is currently generating about 0.03 per unit of risk. If you would invest  968.00  in Gold And Precious on October 26, 2024 and sell it today you would earn a total of  297.00  from holding Gold And Precious or generate 30.68% return on investment over 90 days.

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

Gold And Precious  vs.  Inflation Linked Fixed Income

Gold And Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold And Precious has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Inflation Linked Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inflation Linked Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gold And and Inflation-linked

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

The idea behind Gold And Precious and Inflation Linked Fixed Income 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.