Correlation Between Short Precious and Index Plus
Can any of the company-specific risk be diversified away by investing in both Short Precious and Index Plus 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 Short Precious and Index Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Precious Metals and Index Plus Largecap, you can compare the effects of market volatilities on Short Precious and Index Plus 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 Short Precious with a short position of Index Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Precious and Index Plus.
Diversification Opportunities for Short Precious and Index Plus
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Short and Index is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Index Plus Largecap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Index Plus Largecap and Short Precious 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 Short Precious Metals are associated (or correlated) with Index Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Index Plus Largecap has no effect on the direction of Short Precious i.e., Short Precious and Index Plus go up and down completely randomly.
Pair Corralation between Short Precious and Index Plus
Assuming the 90 days horizon Short Precious Metals is expected to generate 2.85 times more return on investment than Index Plus. However, Short Precious is 2.85 times more volatile than Index Plus Largecap. It trades about 0.07 of its potential returns per unit of risk. Index Plus Largecap is currently generating about 0.14 per unit of risk. If you would invest 924.00 in Short Precious Metals on September 12, 2024 and sell it today you would earn a total of 50.00 from holding Short Precious Metals or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Precious Metals vs. Index Plus Largecap
Performance |
| Timeline |
| Short Precious Metals |
| Index Plus Largecap |
Short Precious and Index Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Precious and Index Plus
The main advantage of trading using opposite Short Precious and Index Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Precious position performs unexpectedly, Index Plus 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 Index Plus will offset losses from the drop in Index Plus' long position.| Short Precious vs. Short Oil Gas | Short Precious vs. Short Oil Gas | Short Precious vs. Elfun Trusts Elfun | Short Precious vs. Walt Disney |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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