Correlation Between Gold And and American Funds

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

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

Diversification Opportunities for Gold And and American Funds

0.39

Correlation Coefficient

Gold And  American Funds

Weak diversification

The 3 months correlation between Gold and American is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gold And Precious and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global and Gold And 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 And Precious are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of Gold And i.e., Gold And and American Funds go up and down completely randomly.

Pair Corralation between Gold And and American Funds

Assuming the 90 days horizon Gold And Precious is expected to generate 1.96 times more return on investment than American Funds. However, Gold And is 1.96 times more volatile than American Funds Global. It trades about 0.07 of its potential returns per unit of risk. American Funds Global is currently generating about 0.08 per unit of risk. If you would invest  1,119  in Gold And Precious on September 5, 2024 and sell it today you would earn a total of  145.00  from holding Gold And Precious or generate 12.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Gold And Precious  vs.  American Funds Global

Gold And Precious

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold And Precious are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gold And is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Global are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gold And and American Funds

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

The idea behind Gold And Precious and American Funds Global 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.