Correlation Between International Equity and The Gold
Can any of the company-specific risk be diversified away by investing in both International Equity and The 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 International Equity and The Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Index and The Gold Bullion, you can compare the effects of market volatilities on International Equity and The 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 International Equity with a short position of The Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and The Gold.
Diversification Opportunities for International Equity and The Gold
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between INTERNATIONAL and The is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and International Equity 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 International Equity Index are associated (or correlated) with The Gold. 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 International Equity i.e., International Equity and The Gold go up and down completely randomly.
Pair Corralation between International Equity and The Gold
Assuming the 90 days horizon International Equity is expected to generate 1.68 times less return on investment than The Gold. But when comparing it to its historical volatility, International Equity Index is 1.02 times less risky than The Gold. It trades about 0.23 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,983 in The Gold Bullion on October 25, 2024 and sell it today you would earn a total of 108.00 from holding The Gold Bullion or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Index vs. The Gold Bullion
Performance |
| Timeline |
| International Equity |
| Gold Bullion |
International Equity and The Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and The Gold
The main advantage of trading using opposite International Equity and The Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, The 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 The Gold will offset losses from the drop in The Gold's long position.| International Equity vs. International Investors Gold | International Equity vs. Gamco Global Gold | International Equity vs. Gabelli Gold Fund | International Equity vs. Wells Fargo Advantage |
| The Gold vs. Schwab Government Money | The Gold vs. Elfun Government Money | The Gold vs. Edward Jones Money | The Gold vs. Hewitt Money Market |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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