Correlation Between Precious Metals and Short Precious
Can any of the company-specific risk be diversified away by investing in both Precious Metals and Short Precious 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 Precious Metals and Short Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precious Metals Fund and Short Precious Metals, you can compare the effects of market volatilities on Precious Metals and Short Precious 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 Precious Metals with a short position of Short Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Short Precious.
Diversification Opportunities for Precious Metals and Short Precious
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Precious and Short is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Fund and Short Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Precious Metals and Precious Metals 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 Precious Metals Fund are associated (or correlated) with Short Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Precious Metals has no effect on the direction of Precious Metals i.e., Precious Metals and Short Precious go up and down completely randomly.
Pair Corralation between Precious Metals and Short Precious
Assuming the 90 days horizon Precious Metals Fund is expected to generate 1.06 times more return on investment than Short Precious. However, Precious Metals is 1.06 times more volatile than Short Precious Metals. It trades about 0.07 of its potential returns per unit of risk. Short Precious Metals is currently generating about -0.07 per unit of risk. 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precious Metals Fund vs. Short Precious Metals
Performance |
| Timeline |
| Precious Metals |
| Short Precious Metals |
Precious Metals and Short Precious Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Short Precious
The main advantage of trading using opposite Precious Metals and Short Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals position performs unexpectedly, Short Precious 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 Short Precious will offset losses from the drop in Short Precious' long position.| Precious Metals vs. Energy Fund Investor | Precious Metals vs. Energy Services Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Health Care Fund |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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