Correlation Between Short Precious and Global Gold

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

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

Diversification Opportunities for Short Precious and Global Gold

-1.0

Correlation Coefficient

Short Precious  Global Gold

Pay attention - limited upside

The 3 months correlation between Short and Global is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Short Precious 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 Short Precious Metals are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Short Precious i.e., Short Precious and Global Gold go up and down completely randomly.

Pair Corralation between Short Precious and Global Gold

Assuming the 90 days horizon Short Precious Metals is expected to under-perform the Global Gold. In addition to that, Short Precious is 1.01 times more volatile than Global Gold Fund. It trades about -0.11 of its total potential returns per unit of risk. Global Gold Fund is currently generating about 0.14 per unit of volatility. If you would invest  1,361  in Global Gold Fund on February 3, 2025 and sell it today you would earn a total of  293.00  from holding Global Gold Fund or generate 21.53% return on investment over 90 days.

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

Short Precious Metals  vs.  Global Gold Fund

Short Precious Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Precious Metals has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Global Gold Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Short Precious and Global Gold

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

The idea behind Short Precious Metals and Global Gold Fund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..