Correlation Between Dow Jones and Gold Portfolio
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Gold Portfolio 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 Dow Jones and Gold Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Gold Portfolio Gold, you can compare the effects of market volatilities on Dow Jones and Gold Portfolio 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 Dow Jones with a short position of Gold Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Gold Portfolio.
Diversification Opportunities for Dow Jones and Gold Portfolio
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Gold is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Gold Portfolio Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Gold and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Gold has no effect on the direction of Dow Jones i.e., Dow Jones and Gold Portfolio go up and down completely randomly.
Pair Corralation between Dow Jones and Gold Portfolio
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.44 times more return on investment than Gold Portfolio. However, Dow Jones Industrial is 2.26 times less risky than Gold Portfolio. It trades about 0.14 of its potential returns per unit of risk. Gold Portfolio Gold is currently generating about 0.04 per unit of risk. If you would invest 3,885,286 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 544,365 from holding Dow Jones Industrial or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Gold Portfolio Gold
Performance |
| Timeline |
Dow Jones and Gold Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Gold Portfolio Gold
Pair trading matchups for Gold Portfolio
Pair Trading with Dow Jones and Gold Portfolio
The main advantage of trading using opposite Dow Jones and Gold Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Gold Portfolio 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 Portfolio will offset losses from the drop in Gold Portfolio's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Gold Portfolio vs. First Eagle Gold | Gold Portfolio vs. First Eagle Gold | Gold Portfolio vs. First Eagle Gold | Gold Portfolio vs. Gold Portfolio Fidelity |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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