Correlation Between The Gold and Short Duration

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

By analyzing existing cross correlation between The Gold Bullion and Short Duration Municipal, you can compare the effects of market volatilities on The Gold and Short Duration 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 The Gold with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Gold and Short Duration.

Diversification Opportunities for The Gold and Short Duration

0.29

Correlation Coefficient

The Gold  Short Duration

Modest diversification

The 3 months correlation between The and Short is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Short Duration Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Municipal and The 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 The Gold Bullion are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Municipal has no effect on the direction of The Gold i.e., The Gold and Short Duration go up and down completely randomly.

Pair Corralation between The Gold and Short Duration

Assuming the 90 days horizon The Gold Bullion is expected to generate 11.02 times more return on investment than Short Duration. However, The Gold is 11.02 times more volatile than Short Duration Municipal. It trades about 0.12 of its potential returns per unit of risk. Short Duration Municipal is currently generating about 0.38 per unit of risk. If you would invest  2,534  in The Gold Bullion on June 8, 2025 and sell it today you would earn a total of  167.00  from holding The Gold Bullion or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

The Gold Bullion  vs.  Short Duration Municipal

Gold Bullion

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, The Gold may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Short Duration Municipal

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Municipal are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Gold and Short Duration

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

The idea behind The Gold Bullion and Short Duration Municipal 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..