Correlation Between Fixed Income and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Fixed Income 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 Fixed Income and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Fixed Income and Precious Metals And, you can compare the effects of market volatilities on Fixed Income 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 Fixed Income with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Precious Metals.
Diversification Opportunities for Fixed Income and Precious Metals
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fixed and Precious is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And and Fixed Income 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 The Fixed Income 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 And has no effect on the direction of Fixed Income i.e., Fixed Income and Precious Metals go up and down completely randomly.
Pair Corralation between Fixed Income and Precious Metals
Assuming the 90 days horizon Fixed Income is expected to generate 1.84 times less return on investment than Precious Metals. But when comparing it to its historical volatility, The Fixed Income is 9.03 times less risky than Precious Metals. It trades about 0.34 of its potential returns per unit of risk. Precious Metals And is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,070 in Precious Metals And on September 12, 2024 and sell it today you would earn a total of 46.00 from holding Precious Metals And or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Fixed Income vs. Precious Metals And
Performance |
| Timeline |
| Fixed Income |
| Precious Metals And |
Fixed Income and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fixed Income and Precious Metals
The main advantage of trading using opposite Fixed Income and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fixed Income 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.| Fixed Income vs. Goldman Sachs Government | Fixed Income vs. Davis Government Bond | Fixed Income vs. Inverse Government Long | Fixed Income vs. Schwab Government Money |
| Precious Metals vs. Federated Hermes Conservative | Precious Metals vs. Jpmorgan Diversified Fund | Precious Metals vs. Elfun Diversified Fund | Precious Metals vs. Blackrock Conservative Prprdptfinstttnl |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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