Correlation Between Gold and Large Cap
Can any of the company-specific risk be diversified away by investing in both Gold and Large Cap 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 Large Cap 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 Large Cap Equity, you can compare the effects of market volatilities on Gold and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold and Large Cap.
Diversification Opportunities for Gold and Large Cap
Average diversification
The 3 months correlation between Gold and Large is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and Large Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Equity 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Equity has no effect on the direction of Gold i.e., Gold and Large Cap go up and down completely randomly.
Pair Corralation between Gold and Large Cap
Assuming the 90 days horizon Gold And Precious is expected to under-perform the Large Cap. In addition to that, Gold is 2.37 times more volatile than Large Cap Equity. It trades about -0.28 of its total potential returns per unit of risk. Large Cap Equity is currently generating about 0.21 per unit of volatility. If you would invest 2,644 in Large Cap Equity on August 31, 2024 and sell it today you would earn a total of 105.00 from holding Large Cap Equity or generate 3.97% 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. Large Cap Equity
Performance |
| Timeline |
| Gold And Precious |
| Large Cap Equity |
Gold and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold and Large Cap
The main advantage of trading using opposite Gold and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| Gold vs. Us Small Cap | Gold vs. Small Pany Growth | Gold vs. Jpmorgan Small Cap | Gold vs. Kinetics Small Cap |
| Large Cap vs. International Investors Gold | Large Cap vs. Fidelity Advisor Gold | Large Cap vs. Global Gold Fund | Large Cap vs. Gold And Precious |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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