Correlation Between Real Estate and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Real Estate 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 Real Estate and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Estate Ultrasector and Precious Metals Ultrasector, you can compare the effects of market volatilities on Real Estate 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 Real Estate with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Precious Metals.
Diversification Opportunities for Real Estate and Precious Metals
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Real and Precious is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Ultrasector and Precious Metals Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals Ultr and Real Estate 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 Real Estate Ultrasector 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 Ultr has no effect on the direction of Real Estate i.e., Real Estate and Precious Metals go up and down completely randomly.
Pair Corralation between Real Estate and Precious Metals
Assuming the 90 days horizon Real Estate Ultrasector is expected to generate 0.52 times more return on investment than Precious Metals. However, Real Estate Ultrasector is 1.92 times less risky than Precious Metals. It trades about 0.08 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about -0.2 per unit of risk. If you would invest 4,676 in Real Estate Ultrasector on August 29, 2024 and sell it today you would earn a total of 128.00 from holding Real Estate Ultrasector or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Estate Ultrasector vs. Precious Metals Ultrasector
Performance |
| Timeline |
| Real Estate Ultrasector |
| Precious Metals Ultr |
Real Estate and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Estate and Precious Metals
The main advantage of trading using opposite Real Estate and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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.| Real Estate vs. Calvert High Yield | Real Estate vs. Siit High Yield | Real Estate vs. Lord Abbett High | Real Estate vs. Artisan High Income |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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