Correlation Between Silver Futures and Gold Futures
Can any of the company-specific risk be diversified away by investing in both Silver Futures and Gold Futures 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 Silver Futures and Gold Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silver Futures and Gold Futures, you can compare the effects of market volatilities on Silver Futures and Gold Futures 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 Silver Futures with a short position of Gold Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver Futures and Gold Futures.
Diversification Opportunities for Silver Futures and Gold Futures
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Silver and Gold is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Silver Futures and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures and Silver Futures 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 Silver Futures are associated (or correlated) with Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of Silver Futures i.e., Silver Futures and Gold Futures go up and down completely randomly.
Pair Corralation between Silver Futures and Gold Futures
Assuming the 90 days horizon Silver Futures is expected to under-perform the Gold Futures. In addition to that, Silver Futures is 1.23 times more volatile than Gold Futures. It trades about -0.17 of its total potential returns per unit of risk. Gold Futures is currently generating about -0.1 per unit of volatility. If you would invest 274,930 in Gold Futures on September 1, 2024 and sell it today you would lose (9,230) from holding Gold Futures or give up 3.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Silver Futures vs. Gold Futures
Performance |
| Timeline |
| Silver Futures |
| Gold Futures |
Silver Futures and Gold Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silver Futures and Gold Futures
The main advantage of trading using opposite Silver Futures and Gold Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Futures position performs unexpectedly, Gold Futures 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 Gold Futures will offset losses from the drop in Gold Futures' long position.| Silver Futures vs. Corn Futures | Silver Futures vs. Orange Juice | Silver Futures vs. Brent Crude Oil | Silver Futures vs. Natural Gas |
| Gold Futures vs. E Mini SP 500 | Gold Futures vs. Silver Futures | Gold Futures vs. Palladium | Gold Futures vs. Mini Dow Jones |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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