Correlation Between Gold and Capital World
Can any of the company-specific risk be diversified away by investing in both Gold and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Gold and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold and Capital World.
Diversification Opportunities for Gold and Capital World
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Gold and Capital is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Gold i.e., Gold and Capital World go up and down completely randomly.
Pair Corralation between Gold and Capital World
Assuming the 90 days horizon Gold And Precious is expected to generate 5.15 times more return on investment than Capital World. However, Gold is 5.15 times more volatile than Capital World Bond. It trades about 0.05 of its potential returns per unit of risk. Capital World Bond is currently generating about -0.08 per unit of risk. If you would invest 1,202 in Gold And Precious on September 2, 2024 and sell it today you would earn a total of 60.00 from holding Gold And Precious or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold And Precious vs. Capital World Bond
Performance |
| Timeline |
| Gold And Precious |
| Capital World Bond |
Gold and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold and Capital World
The main advantage of trading using opposite Gold and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Gold vs. Calamos Dynamic Convertible | Gold vs. Fidelity Sai Convertible | Gold vs. Virtus Convertible | Gold vs. Rationalpier 88 Convertible |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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