Correlation Between Global Gold and Real Estate
Can any of the company-specific risk be diversified away by investing in both Global Gold and Real Estate 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 Real Estate 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 Real Estate Fund, you can compare the effects of market volatilities on Global Gold and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Real Estate.
Diversification Opportunities for Global Gold and Real Estate
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Real is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Real Estate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Fund 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Fund has no effect on the direction of Global Gold i.e., Global Gold and Real Estate go up and down completely randomly.
Pair Corralation between Global Gold and Real Estate
Assuming the 90 days horizon Global Gold Fund is expected to under-perform the Real Estate. In addition to that, Global Gold is 1.96 times more volatile than Real Estate Fund. It trades about -0.16 of its total potential returns per unit of risk. Real Estate Fund is currently generating about 0.01 per unit of volatility. If you would invest 2,808 in Real Estate Fund on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Real Estate Fund or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. Real Estate Fund
Performance |
| Timeline |
| Global Gold Fund |
| Real Estate Fund |
Global Gold and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and Real Estate
The main advantage of trading using opposite Global Gold and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Global Gold vs. Mid Cap Value | Global Gold vs. Equity Growth Fund | Global Gold vs. Income Growth Fund | Global Gold vs. Diversified Bond Fund |
| Real Estate vs. Utilities Fund Investor | Real Estate vs. Emerging Markets Fund | Real Estate vs. Heritage Fund Investor | Real Estate vs. Value Fund Investor |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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