Correlation Between 2 Year and Platinum
Can any of the company-specific risk be diversified away by investing in both 2 Year and Platinum 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 2 Year and Platinum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 2 Year T Note Futures and Platinum, you can compare the effects of market volatilities on 2 Year and Platinum 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 2 Year with a short position of Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2 Year and Platinum.
Diversification Opportunities for 2 Year and Platinum
Significant diversification
The 3 months correlation between ZTUSD and Platinum is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding 2 Year T Note Futures and Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum and 2 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 2 Year T Note Futures are associated (or correlated) with Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum has no effect on the direction of 2 Year i.e., 2 Year and Platinum go up and down completely randomly.
Pair Corralation between 2 Year and Platinum
Assuming the 90 days horizon 2 Year is expected to generate 4.98 times less return on investment than Platinum. But when comparing it to its historical volatility, 2 Year T Note Futures is 12.9 times less risky than Platinum. It trades about 0.04 of its potential returns per unit of risk. Platinum is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 94,490 in Platinum on August 26, 2024 and sell it today you would earn a total of 2,480 from holding Platinum or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.64% |
| Values | Daily Returns |
2 Year T Note Futures vs. Platinum
Performance |
| Timeline |
| 2 Year T |
| Platinum |
2 Year and Platinum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 2 Year and Platinum
The main advantage of trading using opposite 2 Year and Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2 Year position performs unexpectedly, Platinum 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 Platinum will offset losses from the drop in Platinum's long position.| 2 Year vs. 30 Year Treasury | 2 Year vs. 30 Day Fed | 2 Year vs. Class III Milk | 2 Year vs. 10 Year T Note Futures |
| Platinum vs. Heating Oil | Platinum vs. Crude Oil | Platinum vs. Aluminum Futures | Platinum vs. Corn Futures |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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