Correlation Between Global Gold and Gold Bullion
Can any of the company-specific risk be diversified away by investing in both Global Gold and Gold Bullion 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 Gold Bullion 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 The Gold Bullion, you can compare the effects of market volatilities on Global Gold and Gold Bullion 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 Gold Bullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Gold Bullion.
Diversification Opportunities for Global Gold and Gold Bullion
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Gold is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion 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 Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Global Gold i.e., Global Gold and Gold Bullion go up and down completely randomly.
Pair Corralation between Global Gold and Gold Bullion
Assuming the 90 days horizon Global Gold Fund is expected to generate 1.84 times more return on investment than Gold Bullion. However, Global Gold is 1.84 times more volatile than The Gold Bullion. It trades about 0.07 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.12 per unit of risk. If you would invest 1,178 in Global Gold Fund on November 3, 2024 and sell it today you would earn a total of 171.00 from holding Global Gold Fund or generate 14.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. The Gold Bullion
Performance |
| Timeline |
| Global Gold Fund |
| Gold Bullion |
Global Gold and Gold Bullion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and Gold Bullion
The main advantage of trading using opposite Global Gold and Gold Bullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, Gold Bullion 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 Gold Bullion will offset losses from the drop in Gold Bullion's long position.| Global Gold vs. Vanguard Small Cap Value | Global Gold vs. Omni Small Cap Value | Global Gold vs. Heartland Value Plus | Global Gold vs. Fpa Queens Road |
| Gold Bullion vs. Quantified Market Leaders | Gold Bullion vs. Quantified Managed Income | Gold Bullion vs. Quantified Alternative Investment | Gold Bullion vs. Quantified Stf Fund |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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