Correlation Between Banking Portfolio and Gold Portfolio
Can any of the company-specific risk be diversified away by investing in both Banking Portfolio 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 Banking Portfolio and Gold Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Portfolio Banking and Gold Portfolio Gold, you can compare the effects of market volatilities on Banking Portfolio 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 Banking Portfolio with a short position of Gold Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Portfolio and Gold Portfolio.
Diversification Opportunities for Banking Portfolio and Gold Portfolio
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BANKING and Gold is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Banking Portfolio Banking 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 Banking 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 Banking Portfolio Banking 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 Banking Portfolio i.e., Banking Portfolio and Gold Portfolio go up and down completely randomly.
Pair Corralation between Banking Portfolio and Gold Portfolio
Assuming the 90 days horizon Banking Portfolio is expected to generate 4.76 times less return on investment than Gold Portfolio. But when comparing it to its historical volatility, Banking Portfolio Banking is 1.03 times less risky than Gold Portfolio. It trades about 0.07 of its potential returns per unit of risk. Gold Portfolio Gold is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,488 in Gold Portfolio Gold on October 25, 2024 and sell it today you would earn a total of 211.00 from holding Gold Portfolio Gold or generate 8.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Banking Portfolio Banking vs. Gold Portfolio Gold
Performance |
Timeline |
Banking Portfolio Banking |
Gold Portfolio Gold |
Banking Portfolio and Gold Portfolio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Banking Portfolio and Gold Portfolio
The main advantage of trading using opposite Banking Portfolio and Gold Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Portfolio 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.Banking Portfolio vs. Consumer Finance Portfolio | Banking Portfolio vs. Financial Services Portfolio | Banking Portfolio vs. Insurance Portfolio Insurance | Banking Portfolio vs. Brokerage And Investment |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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