Correlation Between US Dollar and Micro Gold
Can any of the company-specific risk be diversified away by investing in both US Dollar 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 US Dollar and Micro Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Dollar and Micro Gold Futures, you can compare the effects of market volatilities on US Dollar 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 US Dollar with a short position of Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Dollar and Micro Gold.
Diversification Opportunities for US Dollar and Micro Gold
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between DXUSD and Micro is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding US Dollar 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 US Dollar 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 US Dollar 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 US Dollar i.e., US Dollar and Micro Gold go up and down completely randomly.
Pair Corralation between US Dollar and Micro Gold
Assuming the 90 days horizon US Dollar is expected to under-perform the Micro Gold. But the commodity apears to be less risky and, when comparing its historical volatility, US Dollar is 2.1 times less risky than Micro Gold. The commodity trades about -0.15 of its potential returns per unit of risk. The Micro Gold Futures is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 266,900 in Micro Gold Futures on November 2, 2024 and sell it today you would earn a total of 18,030 from holding Micro Gold Futures or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Dollar vs. Micro Gold Futures
Performance |
| Timeline |
| US Dollar |
| Micro Gold Futures |
US Dollar and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Dollar and Micro Gold
The main advantage of trading using opposite US Dollar and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Dollar 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.| US Dollar vs. Micro E mini Russell | US Dollar vs. Lean Hogs Futures | US Dollar vs. Class III Milk | US Dollar vs. Micro Gold Futures |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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