Correlation Between 30 Year and Micro Gold

Can any of the company-specific risk be diversified away by investing in both 30 Year and Micro 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 30 Year and Micro Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 30 Year Treasury and Micro Gold Futures, you can compare the effects of market volatilities on 30 Year and Micro 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 30 Year with a short position of Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30 Year and Micro Gold.

Diversification Opportunities for 30 Year and Micro Gold

-0.49

Correlation Coefficient

30 Year  Micro Gold

Very good diversification

The 3 months correlation between ZBUSD and Micro is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding 30 Year Treasury and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Gold Futures and 30 Year 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 30 Year Treasury are associated (or correlated) with Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of 30 Year i.e., 30 Year and Micro Gold go up and down completely randomly.

Pair Corralation between 30 Year and Micro Gold

Assuming the 90 days horizon 30 Year Treasury is expected to under-perform the Micro Gold. But the commodity apears to be less risky and, when comparing its historical volatility, 30 Year Treasury is 1.66 times less risky than Micro Gold. The commodity trades about -0.11 of its potential returns per unit of risk. The Micro Gold Futures is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  252,300  in Micro Gold Futures on August 31, 2024 and sell it today you would earn a total of  13,890  from holding Micro Gold Futures or generate 5.51% return on investment over 90 days.

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

30 Year Treasury  vs.  Micro Gold Futures

30 Year Treasury

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 30 Year Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 30 Year is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Micro Gold Futures

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Gold Futures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Micro Gold is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 30 Year and Micro Gold

The main advantage of trading using opposite 30 Year and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30 Year position performs unexpectedly, Micro 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 Micro Gold will offset losses from the drop in Micro Gold's long position.

The idea behind 30 Year Treasury and Micro Gold Futures 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.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.