Correlation Between Gold Portfolio and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Gold Portfolio and Emerging Markets 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 Gold Portfolio and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Portfolio Fidelity and Emerging Markets Fund, you can compare the effects of market volatilities on Gold Portfolio and Emerging Markets 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 Gold Portfolio with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Portfolio and Emerging Markets.
Diversification Opportunities for Gold Portfolio and Emerging Markets
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gold and Emerging is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Gold Portfolio Fidelity and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Gold Portfolio 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 Gold Portfolio Fidelity are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Gold Portfolio i.e., Gold Portfolio and Emerging Markets go up and down completely randomly.
Pair Corralation between Gold Portfolio and Emerging Markets
Assuming the 90 days horizon Gold Portfolio Fidelity is expected to generate 1.93 times more return on investment than Emerging Markets. However, Gold Portfolio is 1.93 times more volatile than Emerging Markets Fund. It trades about 0.03 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.02 per unit of risk. If you would invest 2,231 in Gold Portfolio Fidelity on September 1, 2024 and sell it today you would earn a total of 421.00 from holding Gold Portfolio Fidelity or generate 18.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Portfolio Fidelity vs. Emerging Markets Fund
Performance |
| Timeline |
| Gold Portfolio Fidelity |
| Emerging Markets |
Gold Portfolio and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Portfolio and Emerging Markets
The main advantage of trading using opposite Gold Portfolio and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Portfolio position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Gold Portfolio vs. Fidelity Select Portfolios | Gold Portfolio vs. Fidelity Natural Resources | Gold Portfolio vs. Materials Portfolio Materials | Gold Portfolio vs. Banking Portfolio Banking |
| Emerging Markets vs. Unconstrained Emerging Markets | Emerging Markets vs. Unconstrained Emerging Markets | Emerging Markets vs. Unconstrained Emerging Markets | Emerging Markets vs. Emerging Markets 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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