Correlation Between World Precious and Gold Bullion

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

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

Diversification Opportunities for World Precious and Gold Bullion

0.6

Correlation Coefficient

World Precious  Gold Bullion

Poor diversification

The 3 months correlation between World and Gold is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding World Precious Minerals and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and World 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 World Precious Minerals are associated (or correlated) with Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of World Precious i.e., World Precious and Gold Bullion go up and down completely randomly.

Pair Corralation between World Precious and Gold Bullion

Assuming the 90 days horizon World Precious Minerals is expected to generate 1.23 times more return on investment than Gold Bullion. However, World Precious is 1.23 times more volatile than The Gold Bullion. It trades about 0.13 of its potential returns per unit of risk. The Gold Bullion is currently generating about -0.02 per unit of risk. If you would invest  188.00  in World Precious Minerals on May 5, 2025 and sell it today you would earn a total of  23.00  from holding World Precious Minerals or generate 12.23% return on investment over 90 days.

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

World Precious Minerals  vs.  The Gold Bullion

World Precious Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in World Precious Minerals are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, World Precious may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Gold Bullion

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gold Bullion has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Gold Bullion is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Precious and Gold Bullion

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

The idea behind World Precious Minerals and The Gold Bullion 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.