Correlation Between Precious Metals and Inverse Russell

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

By analyzing existing cross correlation between Precious Metals And and Inverse Russell 2000, you can compare the effects of market volatilities on Precious Metals and Inverse Russell 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 Inverse Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Inverse Russell.

Diversification Opportunities for Precious Metals and Inverse Russell

0.58

Correlation Coefficient

Precious Metals  Inverse Russell

Very weak diversification

The 3 months correlation between Precious and Inverse is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Inverse Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Russell 2000 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 And are associated (or correlated) with Inverse Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Russell 2000 has no effect on the direction of Precious Metals i.e., Precious Metals and Inverse Russell go up and down completely randomly.

Pair Corralation between Precious Metals and Inverse Russell

Assuming the 90 days horizon Precious Metals And is expected to generate 1.39 times more return on investment than Inverse Russell. However, Precious Metals is 1.39 times more volatile than Inverse Russell 2000. It trades about -0.02 of its potential returns per unit of risk. Inverse Russell 2000 is currently generating about -0.13 per unit of risk. If you would invest  2,172  in Precious Metals And on September 12, 2024 and sell it today you would lose (56.00) from holding Precious Metals And or give up 2.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Precious Metals And  vs.  Inverse Russell 2000

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.

Inverse Russell 2000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Russell 2000 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Precious Metals and Inverse Russell

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

The idea behind Precious Metals And and Inverse Russell 2000 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.