Correlation Between Western Asset and Gold Bullion
Can any of the company-specific risk be diversified away by investing in both Western Asset and Gold Bullion 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 Western Asset and Gold Bullion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset E and The Gold Bullion, you can compare the effects of market volatilities on Western Asset and Gold Bullion 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 Western Asset with a short position of Gold Bullion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Gold Bullion.
Diversification Opportunities for Western Asset and Gold Bullion
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and Gold is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset E and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and Western Asset 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 Western Asset E are associated (or correlated) with Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Western Asset i.e., Western Asset and Gold Bullion go up and down completely randomly.
Pair Corralation between Western Asset and Gold Bullion
Assuming the 90 days horizon Western Asset E is expected to under-perform the Gold Bullion. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset E is 3.07 times less risky than Gold Bullion. The mutual fund trades about -0.1 of its potential returns per unit of risk. The The Gold Bullion is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,058 in The Gold Bullion on November 3, 2024 and sell it today you would earn a total of 120.00 from holding The Gold Bullion or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset E vs. The Gold Bullion
Performance |
| Timeline |
| Western Asset E |
| Gold Bullion |
Western Asset and Gold Bullion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Gold Bullion
The main advantage of trading using opposite Western Asset and Gold Bullion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Gold Bullion 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 Gold Bullion will offset losses from the drop in Gold Bullion's long position.| Western Asset vs. Dws Government Money | Western Asset vs. Schwab Government Money | Western Asset vs. Ridgeworth Seix Government | Western Asset vs. Payden Government Fund |
| Gold Bullion vs. Quantified Market Leaders | Gold Bullion vs. Quantified Managed Income | Gold Bullion vs. Quantified Alternative Investment | Gold Bullion vs. Quantified Stf 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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