Correlation Between Precious Metals and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Precious Metals and Commodities Strategy 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 Precious Metals and Commodities Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precious Metals Fund and Commodities Strategy Fund, you can compare the effects of market volatilities on Precious Metals and Commodities Strategy 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 Precious Metals with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Commodities Strategy.
Diversification Opportunities for Precious Metals and Commodities Strategy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Precious and Commodities is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Precious Metals 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 Precious Metals Fund are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Precious Metals i.e., Precious Metals and Commodities Strategy go up and down completely randomly.
Pair Corralation between Precious Metals and Commodities Strategy
Assuming the 90 days horizon Precious Metals Fund is expected to generate 1.78 times more return on investment than Commodities Strategy. However, Precious Metals is 1.78 times more volatile than Commodities Strategy Fund. It trades about 0.2 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.09 per unit of risk. If you would invest 15,807 in Precious Metals Fund on May 28, 2025 and sell it today you would earn a total of 3,833 from holding Precious Metals Fund or generate 24.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precious Metals Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Precious Metals |
| Commodities Strategy |
Precious Metals and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Commodities Strategy
The main advantage of trading using opposite Precious Metals and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals position performs unexpectedly, Commodities Strategy 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 Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Precious Metals vs. Basic Materials Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Banking Fund Class | Precious Metals vs. Basic Materials Fund |
Check out your portfolio center.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.
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