Correlation Between Precious Metals and Small Cap
Can any of the company-specific risk be diversified away by investing in both Precious Metals and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precious Metals And and Small Cap Value, you can compare the effects of market volatilities on Precious Metals and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Small Cap.
Diversification Opportunities for Precious Metals and Small Cap
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Precious and Small is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 And are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Precious Metals i.e., Precious Metals and Small Cap go up and down completely randomly.
Pair Corralation between Precious Metals and Small Cap
Assuming the 90 days horizon Precious Metals And is expected to generate 1.45 times more return on investment than Small Cap. However, Precious Metals is 1.45 times more volatile than Small Cap Value. It trades about 0.04 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.05 per unit of risk. If you would invest 1,630 in Precious Metals And on September 12, 2024 and sell it today you would earn a total of 486.00 from holding Precious Metals And or generate 29.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Precious Metals And vs. Small Cap Value
Performance |
| Timeline |
| Precious Metals And |
| Small Cap Value |
Precious Metals and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Small Cap
The main advantage of trading using opposite Precious Metals and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Precious Metals vs. Federated Hermes Conservative | Precious Metals vs. Jpmorgan Diversified Fund | Precious Metals vs. Elfun Diversified Fund | Precious Metals vs. Blackrock Conservative Prprdptfinstttnl |
| Small Cap vs. Royce Opportunity Fund | Small Cap vs. Great West Loomis Sayles | Small Cap vs. Valic Company I | Small Cap vs. Mutual Of America |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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