Correlation Between Oil Gas and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Oil Gas and Precious Metals 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 Oil Gas and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Gas Ultrasector and Precious Metals Ultrasector, you can compare the effects of market volatilities on Oil Gas and Precious Metals 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 Oil Gas with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Precious Metals.
Diversification Opportunities for Oil Gas and Precious Metals
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oil and Precious is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Precious Metals Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals Ultr and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals Ultr has no effect on the direction of Oil Gas i.e., Oil Gas and Precious Metals go up and down completely randomly.
Pair Corralation between Oil Gas and Precious Metals
Assuming the 90 days horizon Oil Gas is expected to generate 5.86 times less return on investment than Precious Metals. But when comparing it to its historical volatility, Oil Gas Ultrasector is 1.72 times less risky than Precious Metals. It trades about 0.02 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,580 in Precious Metals Ultrasector on November 3, 2024 and sell it today you would earn a total of 2,068 from holding Precious Metals Ultrasector or generate 57.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Gas Ultrasector vs. Precious Metals Ultrasector
Performance |
| Timeline |
| Oil Gas Ultrasector |
| Precious Metals Ultr |
Oil Gas and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Gas and Precious Metals
The main advantage of trading using opposite Oil Gas and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.| Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector | Oil Gas vs. Basic Materials Ultrasector | Oil Gas vs. Utilities Ultrasector Profund |
| Precious Metals vs. Calvert International Equity | Precious Metals vs. Qs Global Equity | Precious Metals vs. Old Westbury Fixed | Precious Metals vs. Smallcap World Fund |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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