Correlation Between Global Gold and American Funds
Can any of the company-specific risk be diversified away by investing in both Global Gold and American Funds 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 Global Gold and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and American Funds Developing, you can compare the effects of market volatilities on Global Gold and American Funds 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 Global Gold with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and American Funds.
Diversification Opportunities for Global Gold and American Funds
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and American Funds Developing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Developing and Global Gold 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 Global Gold Fund are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Developing has no effect on the direction of Global Gold i.e., Global Gold and American Funds go up and down completely randomly.
Pair Corralation between Global Gold and American Funds
Assuming the 90 days horizon Global Gold Fund is expected to generate 1.7 times more return on investment than American Funds. However, Global Gold is 1.7 times more volatile than American Funds Developing. It trades about 0.41 of its potential returns per unit of risk. American Funds Developing is currently generating about 0.16 per unit of risk. If you would invest 1,211 in Global Gold Fund on November 3, 2024 and sell it today you would earn a total of 138.00 from holding Global Gold Fund or generate 11.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. American Funds Developing
Performance |
| Timeline |
| Global Gold Fund |
| American Funds Developing |
Global Gold and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and American Funds
The main advantage of trading using opposite Global Gold and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Global Gold vs. Eagle Mlp Strategy | Global Gold vs. Dodge Cox Emerging | Global Gold vs. Vy Jpmorgan Emerging | Global Gold vs. Nasdaq 100 2x Strategy |
| American Funds vs. Salient Mlp Energy | American Funds vs. World Energy Fund | American Funds vs. Short Oil Gas | American Funds vs. Oil Gas Ultrasector |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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