Correlation Between MicroSectors Gold and US Commodity

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

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

Diversification Opportunities for MicroSectors Gold and US Commodity

0.0

Correlation Coefficient

MicroSectors Gold  US Commodity

Pay attention - limited upside

The 3 months correlation between MicroSectors and USOD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold Miners and US Commodity Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Commodity Funds and MicroSectors Gold 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 MicroSectors Gold Miners are associated (or correlated) with US Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Commodity Funds has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and US Commodity go up and down completely randomly.

Pair Corralation between MicroSectors Gold and US Commodity

If you would invest (100.00) in US Commodity Funds on February 26, 2024 and sell it today you would earn a total of  100.00  from holding US Commodity Funds or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

MicroSectors Gold Miners  vs.  US Commodity Funds

MicroSectors Gold Miners

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, MicroSectors Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

US Commodity Funds

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MicroSectors Gold and US Commodity

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

The idea behind MicroSectors Gold Miners and US Commodity Funds 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.