Correlation Between Invesco DB and IShares Gold

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

By analyzing existing cross correlation between Invesco DB Base and iShares Gold Strategy, you can compare the effects of market volatilities on Invesco DB and IShares 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 Invesco DB with a short position of IShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and IShares Gold.

Diversification Opportunities for Invesco DB and IShares Gold

0.82

Correlation Coefficient

Invesco DB  IShares Gold

Very poor diversification

The 3 months correlation between Invesco and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Base and iShares Gold Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Strategy and Invesco DB 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 Invesco DB Base are associated (or correlated) with IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Strategy has no effect on the direction of Invesco DB i.e., Invesco DB and IShares Gold go up and down completely randomly.

Pair Corralation between Invesco DB and IShares Gold

Considering the 90-day investment horizon Invesco DB Base is expected to under-perform the IShares Gold. In addition to that, Invesco DB is 1.17 times more volatile than iShares Gold Strategy. It trades about -0.27 of its total potential returns per unit of risk. iShares Gold Strategy is currently generating about -0.16 per unit of volatility. If you would invest  6,379  in iShares Gold Strategy on March 21, 2024 and sell it today you would lose (257.00) from holding iShares Gold Strategy or give up 4.03% of portfolio value over 90 days.

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

Invesco DB Base  vs.  iShares Gold Strategy

Invesco DB Base

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Base are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Invesco DB may actually be approaching a critical reversion point that can send shares even higher in July 2024.

iShares Gold Strategy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Strategy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Gold may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Invesco DB and IShares Gold

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

The idea behind Invesco DB Base and iShares Gold Strategy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.