Correlation Between Gold Bullion and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Gold Bullion and Dow Jones 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 Gold Bullion and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Bullion Securities and Dow Jones Industrial, you can compare the effects of market volatilities on Gold Bullion and Dow Jones 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 Gold Bullion with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Bullion and Dow Jones.
Diversification Opportunities for Gold Bullion and Dow Jones
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gold and Dow is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gold Bullion Securities and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Gold Bullion 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 Gold Bullion Securities are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Gold Bullion i.e., Gold Bullion and Dow Jones go up and down completely randomly.
Pair Corralation between Gold Bullion and Dow Jones
Assuming the 90 days trading horizon Gold Bullion Securities is expected to generate 1.13 times more return on investment than Dow Jones. However, Gold Bullion is 1.13 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.04 per unit of risk. If you would invest 1,812,900 in Gold Bullion Securities on September 23, 2024 and sell it today you would earn a total of 104,550 from holding Gold Bullion Securities or generate 5.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.48% |
Values | Daily Returns |
Gold Bullion Securities vs. Dow Jones Industrial
Performance |
Timeline |
Gold Bullion and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Gold Bullion Securities
Pair trading matchups for Gold Bullion
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Gold Bullion and Dow Jones
The main advantage of trading using opposite Gold Bullion and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Bullion position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.Gold Bullion vs. Ally Financial | Gold Bullion vs. Air Products Chemicals | Gold Bullion vs. Games Workshop Group | Gold Bullion vs. Discover Financial Services |
Dow Jones vs. Nok Airlines Public | Dow Jones vs. Alaska Air Group | Dow Jones vs. Universal Music Group | Dow Jones vs. Copa Holdings SA |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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