Correlation Between Micro Gold and 2 Year
Can any of the company-specific risk be diversified away by investing in both Micro Gold and 2 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 Micro Gold and 2 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro Gold Futures and 2 Year T Note Futures, you can compare the effects of market volatilities on Micro Gold and 2 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 Micro Gold with a short position of 2 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Gold and 2 Year.
Diversification Opportunities for Micro Gold and 2 Year
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Micro and ZTUSD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Micro Gold Futures and 2 Year T Note Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2 Year T and Micro Gold 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 Micro Gold Futures are associated (or correlated) with 2 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2 Year T has no effect on the direction of Micro Gold i.e., Micro Gold and 2 Year go up and down completely randomly.
Pair Corralation between Micro Gold and 2 Year
Assuming the 90 days trading horizon Micro Gold Futures is expected to generate 8.6 times more return on investment than 2 Year. However, Micro Gold is 8.6 times more volatile than 2 Year T Note Futures. It trades about 0.11 of its potential returns per unit of risk. 2 Year T Note Futures is currently generating about 0.03 per unit of risk. If you would invest 214,190 in Micro Gold Futures on September 1, 2024 and sell it today you would earn a total of 51,510 from holding Micro Gold Futures or generate 24.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.48% |
| Values | Daily Returns |
Micro Gold Futures vs. 2 Year T Note Futures
Performance |
| Timeline |
| Micro Gold Futures |
| 2 Year T |
Micro Gold and 2 Year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Gold and 2 Year
The main advantage of trading using opposite Micro Gold and 2 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Gold position performs unexpectedly, 2 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 2 Year will offset losses from the drop in 2 Year's long position.| Micro Gold vs. Oat Futures | Micro Gold vs. Wheat Futures | Micro Gold vs. Feeder Cattle Futures | Micro Gold vs. Micro Silver Futures |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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