Correlation Between Energy Fund and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Energy Fund 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 Energy Fund and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Fund Investor and Precious Metals Fund, you can compare the effects of market volatilities on Energy Fund 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 Energy Fund with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Fund and Precious Metals.
Diversification Opportunities for Energy Fund and Precious Metals
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Precious is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Investor and Precious Metals Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals and Energy Fund 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 Energy Fund Investor 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 Energy Fund i.e., Energy Fund and Precious Metals go up and down completely randomly.
Pair Corralation between Energy Fund and Precious Metals
Assuming the 90 days horizon Energy Fund is expected to generate 102.67 times less return on investment than Precious Metals. But when comparing it to its historical volatility, Energy Fund Investor is 1.43 times less risky than Precious Metals. It trades about 0.01 of its potential returns per unit of risk. Precious Metals Fund is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 3,894 in Precious Metals Fund on November 8, 2024 and sell it today you would earn a total of 553.00 from holding Precious Metals Fund or generate 14.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Energy Fund Investor vs. Precious Metals Fund
Performance |
| Timeline |
| Energy Fund Investor |
| Precious Metals |
Energy Fund and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Fund and Precious Metals
The main advantage of trading using opposite Energy Fund and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Fund 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.| Energy Fund vs. Energy Services Fund | Energy Fund vs. Basic Materials Fund | Energy Fund vs. Health Care Fund | Energy Fund vs. Precious Metals Fund |
| Precious Metals vs. Basic Materials Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Banking Fund Class | Precious Metals vs. Basic Materials 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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