Correlation Between Micro Gold and Micro E

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

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

Diversification Opportunities for Micro Gold and Micro E

-0.72

Correlation Coefficient

Micro Gold  Micro E

Pay attention - limited upside

The 3 months correlation between Micro and Micro is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Micro Gold Futures and Micro E mini Russell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro E mini and Micro 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 Micro Gold Futures are associated (or correlated) with Micro E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro E mini has no effect on the direction of Micro Gold i.e., Micro Gold and Micro E go up and down completely randomly.

Pair Corralation between Micro Gold and Micro E

Assuming the 90 days trading horizon Micro Gold Futures is expected to generate 0.62 times more return on investment than Micro E. However, Micro Gold Futures is 1.62 times less risky than Micro E. It trades about 0.24 of its potential returns per unit of risk. Micro E mini Russell is currently generating about -0.21 per unit of risk. If you would invest  264,740  in Micro Gold Futures on January 6, 2025 and sell it today you would earn a total of  41,290  from holding Micro Gold Futures or generate 15.6% return on investment over 90 days.

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

Micro Gold Futures  vs.  Micro E mini Russell

Micro Gold Futures

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Gold Futures are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Micro Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Micro E mini

Risk-Adjusted Performance

Very Weak

Over the last 90 days Micro E mini Russell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Commodity's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for Micro E mini Russell shareholders.

Pair Trading with Micro Gold and Micro E

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

The idea behind Micro Gold Futures and Micro E mini Russell 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.