Correlation Between Gold Futures and 10 Year
Can any of the company-specific risk be diversified away by investing in both Gold Futures and 10 Year 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 Futures and 10 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Futures and 10 Year T Note Futures, you can compare the effects of market volatilities on Gold Futures and 10 Year 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 Futures with a short position of 10 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Futures and 10 Year.
Diversification Opportunities for Gold Futures and 10 Year
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gold and ZNUSD is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Gold Futures and 10 Year T Note Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 10 Year T and Gold Futures 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 Futures are associated (or correlated) with 10 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 10 Year T has no effect on the direction of Gold Futures i.e., Gold Futures and 10 Year go up and down completely randomly.
Pair Corralation between Gold Futures and 10 Year
Assuming the 90 days horizon Gold Futures is expected to generate 3.26 times more return on investment than 10 Year. However, Gold Futures is 3.26 times more volatile than 10 Year T Note Futures. It trades about -0.02 of its potential returns per unit of risk. 10 Year T Note Futures is currently generating about -0.24 per unit of risk. If you would invest 265,940 in Gold Futures on August 29, 2024 and sell it today you would lose (2,590) from holding Gold Futures or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Futures vs. 10 Year T Note Futures
Performance |
| Timeline |
| Gold Futures |
| 10 Year T |
Gold Futures and 10 Year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Futures and 10 Year
The main advantage of trading using opposite Gold Futures and 10 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Futures position performs unexpectedly, 10 Year 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 10 Year will offset losses from the drop in 10 Year's long position.| Gold Futures vs. Rough Rice Futures | Gold Futures vs. Crude Oil | Gold Futures vs. Silver Futures | Gold Futures vs. Brent Crude Oil |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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