Correlation Between Precious Metals and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Precious Metals and Emerging Markets 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 Emerging Markets 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 Emerging Markets Fund, you can compare the effects of market volatilities on Precious Metals and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Emerging Markets.
Diversification Opportunities for Precious Metals and Emerging Markets
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Precious and Emerging is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Precious Metals i.e., Precious Metals and Emerging Markets go up and down completely randomly.
Pair Corralation between Precious Metals and Emerging Markets
Assuming the 90 days horizon Precious Metals And is expected to under-perform the Emerging Markets. In addition to that, Precious Metals is 1.75 times more volatile than Emerging Markets Fund. It trades about -0.02 of its total potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.07 per unit of volatility. If you would invest 1,629 in Emerging Markets Fund on September 12, 2024 and sell it today you would earn a total of 67.00 from holding Emerging Markets Fund or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Precious Metals And vs. Emerging Markets Fund
Performance |
| Timeline |
| Precious Metals And |
| Emerging Markets |
Precious Metals and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Emerging Markets
The main advantage of trading using opposite Precious Metals and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Precious Metals vs. Capital Growth Fund | Precious Metals vs. Emerging Markets Fund | Precious Metals vs. High Income Fund | Precious Metals vs. Growth Income Fund |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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