Correlation Between DIA and Gold Fields
Can any of the company-specific risk be diversified away by investing in both DIA and Gold Fields 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 DIA and Gold Fields into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIA and Goldfinch, you can compare the effects of market volatilities on DIA and Gold Fields 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 DIA with a short position of Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIA and Gold Fields.
Diversification Opportunities for DIA and Gold Fields
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between DIA and Gold is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding DIA and Goldfinch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields and DIA 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 DIA are associated (or correlated) with Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of DIA i.e., DIA and Gold Fields go up and down completely randomly.
Pair Corralation between DIA and Gold Fields
Assuming the 90 days trading horizon DIA is expected to under-perform the Gold Fields. But the crypto coin apears to be less risky and, when comparing its historical volatility, DIA is 1.37 times less risky than Gold Fields. The crypto coin trades about -0.31 of its potential returns per unit of risk. The Goldfinch is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 163.00 in Goldfinch on August 24, 2024 and sell it today you would lose (22.00) from holding Goldfinch or give up 13.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DIA vs. Goldfinch
Performance |
| Timeline |
| DIA |
| Gold Fields |
DIA and Gold Fields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIA and Gold Fields
The main advantage of trading using opposite DIA and Gold Fields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIA position performs unexpectedly, Gold Fields 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 Fields will offset losses from the drop in Gold Fields' long position.The idea behind DIA and Goldfinch pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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