Correlation Between Gold and Global Gold
Can any of the company-specific risk be diversified away by investing in both Gold and Global Gold 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 Gold and Global Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold And Precious and Global Gold Fund, you can compare the effects of market volatilities on Gold and Global Gold 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 Gold with a short position of Global Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold and Global Gold.
Diversification Opportunities for Gold and Global Gold
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Gold and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Gold 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 Gold And Precious are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Gold i.e., Gold and Global Gold go up and down completely randomly.
Pair Corralation between Gold and Global Gold
Assuming the 90 days horizon Gold is expected to generate 1.2 times less return on investment than Global Gold. But when comparing it to its historical volatility, Gold And Precious is 1.04 times less risky than Global Gold. It trades about 0.03 of its potential returns per unit of risk. Global Gold Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,359 in Global Gold Fund on September 12, 2024 and sell it today you would earn a total of 45.00 from holding Global Gold Fund or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold And Precious vs. Global Gold Fund
Performance |
| Timeline |
| Gold And Precious |
| Global Gold Fund |
Gold and Global Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold and Global Gold
The main advantage of trading using opposite Gold and Global Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold position performs unexpectedly, Global Gold 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 Global Gold will offset losses from the drop in Global Gold's long position.| Gold vs. Fidelity Real Estate | Gold vs. Guggenheim Risk Managed | Gold vs. Vy Clarion Real | Gold vs. Columbia Real Estate |
| Global Gold vs. Sa Worldwide Moderate | Global Gold vs. Putnman Retirement Ready | Global Gold vs. Pro Blend Moderate Term | Global Gold vs. Franklin Lifesmart 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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