Correlation Between Energy Services and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Energy Services 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 Services 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 Services Fund and Precious Metals Fund, you can compare the effects of market volatilities on Energy Services 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 Services with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Precious Metals.
Diversification Opportunities for Energy Services and Precious Metals
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Energy and Precious is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund 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 Services 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 Services Fund 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 Services i.e., Energy Services and Precious Metals go up and down completely randomly.
Pair Corralation between Energy Services and Precious Metals
Assuming the 90 days horizon Energy Services Fund is expected to under-perform the Precious Metals. But the mutual fund apears to be less risky and, when comparing its historical volatility, Energy Services Fund is 1.38 times less risky than Precious Metals. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Precious Metals Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,093 in Precious Metals Fund on November 23, 2024 and sell it today you would earn a total of 243.00 from holding Precious Metals Fund or generate 5.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Energy Services Fund vs. Precious Metals Fund
Performance |
Timeline |
Energy Services |
Precious Metals |
Energy Services and Precious Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Energy Services and Precious Metals
The main advantage of trading using opposite Energy Services and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services 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 Services vs. Energy Fund Investor | ||
Energy Services vs. Basic Materials Fund | ||
Energy Services vs. Electronics Fund Investor | ||
Energy Services vs. Health Care 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |