Correlation Between Natural Gas and Micro Gold
Can any of the company-specific risk be diversified away by investing in both Natural Gas and Micro Gold 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 Natural Gas and Micro Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas and Micro Gold Futures, you can compare the effects of market volatilities on Natural Gas and Micro Gold 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 Natural Gas with a short position of Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and Micro Gold.
Diversification Opportunities for Natural Gas and Micro Gold
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Natural and Micro is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Gold Futures and Natural Gas 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 Natural Gas are associated (or correlated) with Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of Natural Gas i.e., Natural Gas and Micro Gold go up and down completely randomly.
Pair Corralation between Natural Gas and Micro Gold
Assuming the 90 days horizon Natural Gas is expected to generate 5.92 times more return on investment than Micro Gold. However, Natural Gas is 5.92 times more volatile than Micro Gold Futures. It trades about 0.27 of its potential returns per unit of risk. Micro Gold Futures is currently generating about -0.08 per unit of risk. If you would invest 234.00 in Natural Gas on August 24, 2024 and sell it today you would earn a total of 102.00 from holding Natural Gas or generate 43.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Gas vs. Micro Gold Futures
Performance |
| Timeline |
| Natural Gas |
| Micro Gold Futures |
Natural Gas and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Gas and Micro Gold
The main advantage of trading using opposite Natural Gas and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, Micro Gold 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 Micro Gold will offset losses from the drop in Micro Gold's long position.| Natural Gas vs. Micro Gold Futures | Natural Gas vs. Cotton | Natural Gas vs. Five Year Treasury Note | Natural Gas vs. Palladium |
| Micro Gold vs. Corn Futures | Micro Gold vs. Micro E mini Russell | Micro Gold vs. Orange Juice | Micro Gold vs. Live Cattle 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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