Correlation Between Gold Bullion and Jennison Natural
Can any of the company-specific risk be diversified away by investing in both Gold Bullion and Jennison Natural 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 Gold Bullion and Jennison Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gold Bullion and Jennison Natural Resources, you can compare the effects of market volatilities on Gold Bullion and Jennison Natural 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 Gold Bullion with a short position of Jennison Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Bullion and Jennison Natural.
Diversification Opportunities for Gold Bullion and Jennison Natural
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gold and Jennison is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Jennison Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jennison Natural Res and Gold Bullion 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 The Gold Bullion are associated (or correlated) with Jennison Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jennison Natural Res has no effect on the direction of Gold Bullion i.e., Gold Bullion and Jennison Natural go up and down completely randomly.
Pair Corralation between Gold Bullion and Jennison Natural
Assuming the 90 days horizon The Gold Bullion is expected to generate 0.71 times more return on investment than Jennison Natural. However, The Gold Bullion is 1.4 times less risky than Jennison Natural. It trades about 0.08 of its potential returns per unit of risk. Jennison Natural Resources is currently generating about 0.03 per unit of risk. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gold Bullion vs. Jennison Natural Resources
Performance |
| Timeline |
| Gold Bullion |
| Jennison Natural Res |
Gold Bullion and Jennison Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Bullion and Jennison Natural
The main advantage of trading using opposite Gold Bullion and Jennison Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Bullion position performs unexpectedly, Jennison Natural 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 Jennison Natural will offset losses from the drop in Jennison Natural's long position.| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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