Correlation Between Precious Metals and Vanguard 500
Can any of the company-specific risk be diversified away by investing in both Precious Metals and Vanguard 500 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 Vanguard 500 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 Vanguard 500 Index, you can compare the effects of market volatilities on Precious Metals and Vanguard 500 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 Vanguard 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Vanguard 500.
Diversification Opportunities for Precious Metals and Vanguard 500
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Precious and Vanguard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Vanguard 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 500 Index 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 Vanguard 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard 500 Index has no effect on the direction of Precious Metals i.e., Precious Metals and Vanguard 500 go up and down completely randomly.
Pair Corralation between Precious Metals and Vanguard 500
Assuming the 90 days horizon Precious Metals And is expected to generate 2.25 times more return on investment than Vanguard 500. However, Precious Metals is 2.25 times more volatile than Vanguard 500 Index. It trades about 0.29 of its potential returns per unit of risk. Vanguard 500 Index is currently generating about -0.06 per unit of risk. If you would invest 2,138 in Precious Metals And on November 28, 2024 and sell it today you would earn a total of 198.00 from holding Precious Metals And or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precious Metals And vs. Vanguard 500 Index
Performance |
| Timeline |
| Precious Metals And |
| Vanguard 500 Index |
Precious Metals and Vanguard 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Vanguard 500
The main advantage of trading using opposite Precious Metals and Vanguard 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals position performs unexpectedly, Vanguard 500 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 Vanguard 500 will offset losses from the drop in Vanguard 500's long position.| Precious Metals vs. College Retirement Equities | Precious Metals vs. Transamerica Cleartrack Retirement | Precious Metals vs. Hartford Moderate Allocation | Precious Metals vs. Fidelity Managed Retirement |
| Vanguard 500 vs. College Retirement Equities | Vanguard 500 vs. Wisdomtree Siegel Moderate | Vanguard 500 vs. Blackrock Moderate Prepared | Vanguard 500 vs. Vanguard Target Retirement |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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