Correlation Between Paramount Gold and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Paramount Gold and Dow Jones 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 Paramount Gold and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paramount Gold Nevada and Dow Jones Industrial, you can compare the effects of market volatilities on Paramount Gold and Dow Jones 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 Paramount Gold with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Gold and Dow Jones.
Diversification Opportunities for Paramount Gold and Dow Jones
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Paramount and Dow is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Gold Nevada and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Paramount 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 Paramount Gold Nevada are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Paramount Gold i.e., Paramount Gold and Dow Jones go up and down completely randomly.
Pair Corralation between Paramount Gold and Dow Jones
Considering the 90-day investment horizon Paramount Gold Nevada is expected to generate 5.97 times more return on investment than Dow Jones. However, Paramount Gold is 5.97 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of risk. If you would invest 29.00 in Paramount Gold Nevada on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Paramount Gold Nevada or generate 41.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paramount Gold Nevada vs. Dow Jones Industrial
Performance |
| Timeline |
Paramount Gold and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Paramount Gold Nevada
Pair trading matchups for Paramount Gold
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Paramount Gold and Dow Jones
The main advantage of trading using opposite Paramount Gold and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Gold position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Paramount Gold vs. Vista Gold | Paramount Gold vs. International Tower Hill | Paramount Gold vs. Avino Silver Gold | Paramount Gold vs. Seabridge Gold |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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