Correlation Between E Mini and Gold Futures
Can any of the company-specific risk be diversified away by investing in both E Mini and Gold Futures 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 E Mini and Gold Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Mini SP 500 and Gold Futures, you can compare the effects of market volatilities on E Mini and Gold Futures 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 E Mini with a short position of Gold Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Mini and Gold Futures.
Diversification Opportunities for E Mini and Gold Futures
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ESUSD and Gold is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding E Mini SP 500 and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures and E Mini 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 E Mini SP 500 are associated (or correlated) with Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of E Mini i.e., E Mini and Gold Futures go up and down completely randomly.
Pair Corralation between E Mini and Gold Futures
Assuming the 90 days horizon E Mini SP 500 is expected to generate 0.53 times more return on investment than Gold Futures. However, E Mini SP 500 is 1.9 times less risky than Gold Futures. It trades about 0.34 of its potential returns per unit of risk. Gold Futures is currently generating about -0.1 per unit of risk. If you would invest 574,325 in E Mini SP 500 on September 3, 2024 and sell it today you would earn a total of 30,825 from holding E Mini SP 500 or generate 5.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Mini SP 500 vs. Gold Futures
Performance |
| Timeline |
| E Mini SP |
| Gold Futures |
E Mini and Gold Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Mini and Gold Futures
The main advantage of trading using opposite E Mini and Gold Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Mini position performs unexpectedly, Gold Futures 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 Futures will offset losses from the drop in Gold Futures' long position.The idea behind E Mini SP 500 and Gold Futures 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.| Gold Futures vs. Micro Gold Futures | Gold Futures vs. 30 Year Treasury | Gold Futures vs. Cocoa | Gold Futures vs. Platinum |
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 CEOs Directory module to screen CEOs from public companies around the world.
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