Correlation Between NYSE Composite and Gold Bullion
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Gold Bullion 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 NYSE Composite and Gold Bullion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and The Gold Bullion, you can compare the effects of market volatilities on NYSE Composite and Gold Bullion 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 NYSE Composite with a short position of Gold Bullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Gold Bullion.
Diversification Opportunities for NYSE Composite and Gold Bullion
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NYSE and Gold is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and NYSE Composite 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 NYSE Composite are associated (or correlated) with Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of NYSE Composite i.e., NYSE Composite and Gold Bullion go up and down completely randomly.
Pair Corralation between NYSE Composite and Gold Bullion
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.01 times less return on investment than Gold Bullion. But when comparing it to its historical volatility, NYSE Composite is 1.3 times less risky than Gold Bullion. It trades about 0.11 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,976 in The Gold Bullion on September 2, 2024 and sell it today you would earn a total of 595.00 from holding The Gold Bullion or generate 30.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. The Gold Bullion
Performance |
| Timeline |
NYSE Composite and Gold Bullion Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
The Gold Bullion
Pair trading matchups for Gold Bullion
Pair Trading with NYSE Composite and Gold Bullion
The main advantage of trading using opposite NYSE Composite and Gold Bullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Gold Bullion 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 Bullion will offset losses from the drop in Gold Bullion's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Gold Bullion vs. Mirova Global Green | Gold Bullion vs. Morgan Stanley Global | Gold Bullion vs. Federated Global Allocation | Gold Bullion vs. Commonwealth Global Fund |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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