Correlation Between Gold Bullion and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Gold Bullion and Precious Metals 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 Precious Metals 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 Precious Metals Fund, you can compare the effects of market volatilities on Gold Bullion and Precious Metals 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 Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Bullion and Precious Metals.
Diversification Opportunities for Gold Bullion and Precious Metals
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gold and Precious is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Precious Metals Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals has no effect on the direction of Gold Bullion i.e., Gold Bullion and Precious Metals go up and down completely randomly.
Pair Corralation between Gold Bullion and Precious Metals
Assuming the 90 days horizon Gold Bullion is expected to generate 1.21 times less return on investment than Precious Metals. But when comparing it to its historical volatility, The Gold Bullion is 2.11 times less risky than Precious Metals. It trades about 0.13 of its potential returns per unit of risk. Precious Metals Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,149 in Precious Metals Fund on November 9, 2024 and sell it today you would earn a total of 1,298 from holding Precious Metals Fund or generate 41.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gold Bullion vs. Precious Metals Fund
Performance |
| Timeline |
| Gold Bullion |
| Precious Metals |
Gold Bullion and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Bullion and Precious Metals
The main advantage of trading using opposite Gold Bullion and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Bullion position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.| Gold Bullion vs. Quantified Market Leaders | Gold Bullion vs. Quantified Managed Income | Gold Bullion vs. Quantified Alternative Investment | Gold Bullion vs. Quantified Stf Fund |
| Precious Metals vs. Energy Fund Investor | Precious Metals vs. Energy Services Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Health Care 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |