Correlation Between Gold and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Gold and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Gold and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold and Dow Jones.
Diversification Opportunities for Gold and Dow Jones
Significant diversification
The 3 months correlation between Gold and Dow is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Gold i.e., Gold and Dow Jones go up and down completely randomly.
Pair Corralation between Gold and Dow Jones
Assuming the 90 days horizon Gold And Precious is expected to generate 2.48 times more return on investment than Dow Jones. However, Gold is 2.48 times more volatile than Dow Jones Industrial. It trades about 0.05 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of risk. If you would invest 990.00 in Gold And Precious on August 31, 2024 and sell it today you would earn a total of 272.00 from holding Gold And Precious or generate 27.47% 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. Dow Jones Industrial
Performance |
| Timeline |
Gold and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Gold And Precious
Pair trading matchups for Gold
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Gold and Dow Jones
The main advantage of trading using opposite Gold and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Gold vs. Us Small Cap | Gold vs. Small Pany Growth | Gold vs. Jpmorgan Small Cap | Gold vs. Kinetics Small Cap |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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