Correlation Between Class III and Gold Futures
Can any of the company-specific risk be diversified away by investing in both Class III and Gold Futures 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 Class III and Gold Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Class III Milk and Gold Futures, you can compare the effects of market volatilities on Class III and Gold Futures 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 Class III with a short position of Gold Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Class III and Gold Futures.
Diversification Opportunities for Class III and Gold Futures
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Class and Gold is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Class III Milk and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures and Class III 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 Class III Milk are associated (or correlated) with Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of Class III i.e., Class III and Gold Futures go up and down completely randomly.
Pair Corralation between Class III and Gold Futures
Assuming the 90 days horizon Class III Milk is expected to under-perform the Gold Futures. In addition to that, Class III is 2.22 times more volatile than Gold Futures. It trades about -0.23 of its total potential returns per unit of risk. Gold Futures is currently generating about -0.08 per unit of volatility. If you would invest 272,940 in Gold Futures on August 24, 2024 and sell it today you would lose (5,630) from holding Gold Futures or give up 2.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Class III Milk vs. Gold Futures
Performance |
| Timeline |
| Class III Milk |
| Gold Futures |
Class III and Gold Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Class III and Gold Futures
The main advantage of trading using opposite Class III and Gold Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Class III position performs unexpectedly, Gold Futures 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 Futures will offset losses from the drop in Gold Futures' long position.| Class III vs. Soybean Futures | Class III vs. E Mini SP 500 | Class III vs. 30 Year Treasury | Class III vs. 2 Year T Note Futures |
| Gold Futures vs. Micro Gold Futures | Gold Futures vs. Orange Juice | Gold Futures vs. Palladium | Gold Futures vs. Class III Milk |
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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