Correlation Between US Dollar and Platinum

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

By analyzing existing cross correlation between US Dollar and Platinum, you can compare the effects of market volatilities on US Dollar 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 US Dollar with a short position of Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Dollar and Platinum.

Diversification Opportunities for US Dollar and Platinum

-0.09

Correlation Coefficient

US Dollar  Platinum

Good diversification

The 3 months correlation between DXUSD and Platinum is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding US Dollar and Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum and US Dollar 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 US Dollar 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 US Dollar i.e., US Dollar and Platinum go up and down completely randomly.

Pair Corralation between US Dollar and Platinum

Assuming the 90 days horizon US Dollar is expected to generate 1.36 times less return on investment than Platinum. But when comparing it to its historical volatility, US Dollar is 4.14 times less risky than Platinum. It trades about 0.16 of its potential returns per unit of risk. Platinum is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  90,990  in Platinum on September 2, 2024 and sell it today you would earn a total of  4,420  from holding Platinum or generate 4.86% return on investment over 90 days.

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

US Dollar  vs.  Platinum

US Dollar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Dollar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, US Dollar is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Platinum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Platinum is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with US Dollar and Platinum

The main advantage of trading using opposite US Dollar and Platinum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Dollar 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.

The idea behind US Dollar and Platinum 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.