Correlation Between Sit Government and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Sit Government 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 Sit Government and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sit Government Securities and Precious Metals Ultrasector, you can compare the effects of market volatilities on Sit Government 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 Sit Government with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sit Government and Precious Metals.
Diversification Opportunities for Sit Government and Precious Metals
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sit and Precious is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sit Government Securities 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 Sit Government 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 Sit Government Securities 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 Sit Government i.e., Sit Government and Precious Metals go up and down completely randomly.
Pair Corralation between Sit Government and Precious Metals
Assuming the 90 days horizon Sit Government is expected to generate 15.17 times less return on investment than Precious Metals. But when comparing it to its historical volatility, Sit Government Securities is 13.79 times less risky than Precious Metals. It trades about 0.19 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 5,102 in Precious Metals Ultrasector on September 13, 2024 and sell it today you would earn a total of 602.00 from holding Precious Metals Ultrasector or generate 11.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sit Government Securities vs. Precious Metals Ultrasector
Performance |
| Timeline |
| Sit Government Securities |
| Precious Metals Ultr |
Sit Government and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sit Government and Precious Metals
The main advantage of trading using opposite Sit Government and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sit Government 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.| Sit Government vs. Sit Small Cap | Sit Government vs. Sit Global Dividend | Sit Government vs. Sit Global Dividend | Sit Government vs. Sit Small Cap |
| Precious Metals vs. Short Real Estate | Precious Metals vs. Short Real Estate | Precious Metals vs. Ultrashort Mid Cap Profund | Precious Metals vs. Ultrashort Mid Cap Profund |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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