Correlation Between Gold and Small Capitalization
Can any of the company-specific risk be diversified away by investing in both Gold and Small Capitalization 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 Small Capitalization 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 Small Capitalization Portfolio, you can compare the effects of market volatilities on Gold and Small Capitalization 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 Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold and Small Capitalization.
Diversification Opportunities for Gold and Small Capitalization
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gold and Small is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization 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 Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Gold i.e., Gold and Small Capitalization go up and down completely randomly.
Pair Corralation between Gold and Small Capitalization
Assuming the 90 days horizon Gold And Precious is expected to generate 0.43 times more return on investment than Small Capitalization. However, Gold And Precious is 2.3 times less risky than Small Capitalization. It trades about 0.07 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.03 per unit of risk. If you would invest 903.00 in Gold And Precious on September 12, 2024 and sell it today you would earn a total of 381.00 from holding Gold And Precious or generate 42.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold And Precious vs. Small Capitalization Portfolio
Performance |
| Timeline |
| Gold And Precious |
| Small Capitalization |
Gold and Small Capitalization Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold and Small Capitalization
The main advantage of trading using opposite Gold and Small Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold position performs unexpectedly, Small Capitalization 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 Small Capitalization will offset losses from the drop in Small Capitalization's long position.| Gold vs. Artisan Thematic Fund | Gold vs. Auer Growth Fund | Gold vs. Balanced Fund Investor | Gold vs. Nasdaq 100 Index Fund |
| Small Capitalization vs. Gabelli Gold Fund | Small Capitalization vs. Goldman Sachs Clean | Small Capitalization vs. Gold And Precious | Small Capitalization vs. Gamco Global Gold |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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