Correlation Between Class III and Micro Gold
Can any of the company-specific risk be diversified away by investing in both Class III and Micro Gold 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 Micro Gold 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 Micro Gold Futures, you can compare the effects of market volatilities on Class III and Micro Gold 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 Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Class III and Micro Gold.
Diversification Opportunities for Class III and Micro Gold
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Class and Micro is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Class III Milk and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro 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 Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of Class III i.e., Class III and Micro Gold go up and down completely randomly.
Pair Corralation between Class III and Micro Gold
Assuming the 90 days horizon Class III Milk is expected to generate 2.98 times more return on investment than Micro Gold. However, Class III is 2.98 times more volatile than Micro Gold Futures. It trades about 0.18 of its potential returns per unit of risk. Micro Gold Futures is currently generating about 0.29 per unit of risk. If you would invest 1,866 in Class III Milk on October 20, 2024 and sell it today you would earn a total of 164.00 from holding Class III Milk or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Class III Milk vs. Micro Gold Futures
Performance |
| Timeline |
| Class III Milk |
| Micro Gold Futures |
Class III and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Class III and Micro Gold
The main advantage of trading using opposite Class III and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Class III position performs unexpectedly, Micro Gold 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 Micro Gold will offset losses from the drop in Micro Gold's long position.| Class III vs. Silver Futures | Class III vs. Palladium | Class III vs. Soybean Futures | Class III vs. Lean Hogs Futures |
| Micro Gold vs. Silver Futures | Micro Gold vs. Heating Oil | Micro Gold vs. Five Year Treasury Note | Micro Gold vs. Cocoa |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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