Correlation Between Precious Metals and Short Small

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

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

Diversification Opportunities for Precious Metals and Short Small

0.68

Correlation Coefficient

Precious Metals  Short Small

Poor diversification

The 3 months correlation between Precious and Short is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Ultrasector and Short Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Small Cap and Precious Metals 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 Precious Metals Ultrasector are associated (or correlated) with Short Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Small Cap has no effect on the direction of Precious Metals i.e., Precious Metals and Short Small go up and down completely randomly.

Pair Corralation between Precious Metals and Short Small

Assuming the 90 days horizon Precious Metals Ultrasector is expected to under-perform the Short Small. In addition to that, Precious Metals is 2.11 times more volatile than Short Small Cap Profund. It trades about -0.1 of its total potential returns per unit of risk. Short Small Cap Profund is currently generating about 0.01 per unit of volatility. If you would invest  5,386  in Short Small Cap Profund on September 20, 2024 and sell it today you would earn a total of  6.00  from holding Short Small Cap Profund or generate 0.11% return on investment over 90 days.

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

Precious Metals Ultrasector  vs.  Short Small Cap Profund

Precious Metals Ultr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Short Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Precious Metals and Short Small

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

The idea behind Precious Metals Ultrasector and Short Small Cap Profund 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.