Correlation Between VelocityShares and DB Gold

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

By analyzing existing cross correlation between VelocityShares 3x Long and DB Gold Double, you can compare the effects of market volatilities on VelocityShares and DB 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 VelocityShares with a short position of DB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of VelocityShares and DB Gold.

Diversification Opportunities for VelocityShares and DB Gold

0.59

Correlation Coefficient

VelocityShares  DB Gold

Very weak diversification

The 3 months correlation between VelocityShares and DGP is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding VelocityShares 3x Long and DB Gold Double in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Double and VelocityShares 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 VelocityShares 3x Long are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Double has no effect on the direction of VelocityShares i.e., VelocityShares and DB Gold go up and down completely randomly.

Pair Corralation between VelocityShares and DB Gold

If you would invest  4,199  in DB Gold Double on February 28, 2024 and sell it today you would earn a total of  1,245  from holding DB Gold Double or generate 29.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

VelocityShares 3x Long  vs.  DB Gold Double

VelocityShares 3x Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VelocityShares 3x Long has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VelocityShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DB Gold Double

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DB Gold Double are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, DB Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VelocityShares and DB Gold

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

The idea behind VelocityShares 3x Long and DB Gold Double 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.