Correlation Between 10 Year and Micro Gold
Can any of the company-specific risk be diversified away by investing in both 10 Year and Micro Gold 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 10 Year and Micro Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 10 Year T Note Futures and Micro Gold Futures, you can compare the effects of market volatilities on 10 Year and Micro Gold 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 10 Year with a short position of Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of 10 Year and Micro Gold.
Diversification Opportunities for 10 Year and Micro Gold
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ZNUSD and Micro is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding 10 Year T Note Futures and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Gold Futures and 10 Year 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 10 Year T Note Futures are associated (or correlated) with Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of 10 Year i.e., 10 Year and Micro Gold go up and down completely randomly.
Pair Corralation between 10 Year and Micro Gold
Assuming the 90 days horizon 10 Year is expected to generate 23.79 times less return on investment than Micro Gold. But when comparing it to its historical volatility, 10 Year T Note Futures is 2.86 times less risky than Micro Gold. It trades about 0.05 of its potential returns per unit of risk. Micro Gold Futures is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 264,100 in Micro Gold Futures on November 1, 2024 and sell it today you would earn a total of 20,830 from holding Micro Gold Futures or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
10 Year T Note Futures vs. Micro Gold Futures
Performance |
| Timeline |
| 10 Year T |
| Micro Gold Futures |
10 Year and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 10 Year and Micro Gold
The main advantage of trading using opposite 10 Year and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 10 Year position performs unexpectedly, Micro Gold 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 Micro Gold will offset losses from the drop in Micro Gold's long position.| 10 Year vs. Mini Dow Jones | 10 Year vs. Gasoline RBOB | 10 Year vs. Rough Rice Futures | 10 Year vs. Platinum |
| Micro Gold vs. 10 Year T Note Futures | Micro Gold vs. Platinum | Micro Gold vs. Lean Hogs Futures | Micro Gold vs. Orange Juice |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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