Correlation Between Bond Fund and Precious Metals

Can any of the company-specific risk be diversified away by investing in both Bond Fund and Precious Metals 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 Bond Fund and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Bond Fund and Precious Metals And, you can compare the effects of market volatilities on Bond Fund and Precious Metals 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 Bond Fund with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bond Fund and Precious Metals.

Diversification Opportunities for Bond Fund and Precious Metals

0.04

Correlation Coefficient

Bond Fund  Precious Metals

Significant diversification

The 3 months correlation between Bond and Precious is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding The Bond Fund and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And and Bond Fund 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 The Bond Fund are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of Bond Fund i.e., Bond Fund and Precious Metals go up and down completely randomly.

Pair Corralation between Bond Fund and Precious Metals

Assuming the 90 days horizon The Bond Fund is expected to generate 0.19 times more return on investment than Precious Metals. However, The Bond Fund is 5.29 times less risky than Precious Metals. It trades about -0.08 of its potential returns per unit of risk. Precious Metals And is currently generating about -0.04 per unit of risk. If you would invest  1,824  in The Bond Fund on September 13, 2024 and sell it today you would lose (31.00) from holding The Bond Fund or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Bond Fund  vs.  Precious Metals And

Bond Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Bond Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Precious Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bond Fund and Precious Metals

The main advantage of trading using opposite Bond Fund and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bond Fund position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.

The idea behind The Bond Fund and Precious Metals And pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.