Correlation Between Precious Metals and Oil Gas
Can any of the company-specific risk be diversified away by investing in both Precious Metals and Oil Gas 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 Precious Metals and Oil Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precious Metals Ultrasector and Oil Gas Ultrasector, you can compare the effects of market volatilities on Precious Metals and Oil Gas 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 Precious Metals with a short position of Oil Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Oil Gas.
Diversification Opportunities for Precious Metals and Oil Gas
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PRECIOUS and Oil is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Ultrasector and Oil Gas Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Gas Ultrasector and Precious Metals 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 Precious Metals Ultrasector are associated (or correlated) with Oil Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Gas Ultrasector has no effect on the direction of Precious Metals i.e., Precious Metals and Oil Gas go up and down completely randomly.
Pair Corralation between Precious Metals and Oil Gas
Assuming the 90 days horizon Precious Metals Ultrasector is expected to generate 1.73 times more return on investment than Oil Gas. However, Precious Metals is 1.73 times more volatile than Oil Gas Ultrasector. It trades about 0.07 of its potential returns per unit of risk. Oil Gas Ultrasector is currently generating about 0.04 per unit of risk. If you would invest 3,203 in Precious Metals Ultrasector on November 9, 2024 and sell it today you would earn a total of 1,893 from holding Precious Metals Ultrasector or generate 59.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precious Metals Ultrasector vs. Oil Gas Ultrasector
Performance |
| Timeline |
| Precious Metals Ultr |
| Oil Gas Ultrasector |
Precious Metals and Oil Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Oil Gas
The main advantage of trading using opposite Precious Metals and Oil Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals position performs unexpectedly, Oil Gas 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 Oil Gas will offset losses from the drop in Oil Gas' long position.| Precious Metals vs. Nasdaq 100 2x Strategy | Precious Metals vs. Nasdaq 100 2x Strategy | Precious Metals vs. Nasdaq 100 2x Strategy | Precious Metals vs. Ultra Nasdaq 100 Profunds |
| Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector | Oil Gas vs. Basic Materials Ultrasector | Oil Gas vs. Utilities Ultrasector Profund |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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