Correlation Between Us Government and Gold

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

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

Diversification Opportunities for Us Government and Gold

-0.64

Correlation Coefficient

Us Government  Gold

Excellent diversification

The 3 months correlation between UGSDX and Gold is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Gold And Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold And Precious and Us Government 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 Government Securities are associated (or correlated) with Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold And Precious has no effect on the direction of Us Government i.e., Us Government and Gold go up and down completely randomly.

Pair Corralation between Us Government and Gold

Assuming the 90 days horizon Us Government Securities is expected to generate 0.06 times more return on investment than Gold. However, Us Government Securities is 15.97 times less risky than Gold. It trades about 0.07 of its potential returns per unit of risk. Gold And Precious is currently generating about -0.1 per unit of risk. If you would invest  194.00  in Us Government Securities on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Us Government Securities or generate 0.52% return on investment over 90 days.

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

Us Government Securities  vs.  Gold And Precious

Us Government Securities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gold And Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold And Precious has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Us Government and Gold

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

The idea behind Us Government Securities and Gold And Precious 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..