Correlation Between VanEck Gold and IShares Gold

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

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

Diversification Opportunities for VanEck Gold and IShares Gold

0.97

Correlation Coefficient

VanEck Gold  IShares Gold

Almost no diversification

The 3 months correlation between VanEck and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gold Miners and iShares Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Trust and VanEck 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 VanEck Gold Miners 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 Trust has no effect on the direction of VanEck Gold i.e., VanEck Gold and IShares Gold go up and down completely randomly.

Pair Corralation between VanEck Gold and IShares Gold

Considering the 90-day investment horizon VanEck Gold Miners is expected to generate 2.07 times more return on investment than IShares Gold. However, VanEck Gold is 2.07 times more volatile than iShares Gold Trust. It trades about 0.15 of its potential returns per unit of risk. iShares Gold Trust is currently generating about 0.02 per unit of risk. If you would invest  3,355  in VanEck Gold Miners on February 17, 2024 and sell it today you would earn a total of  211.00  from holding VanEck Gold Miners or generate 6.29% return on investment over 90 days.

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

VanEck Gold Miners  vs.  iShares Gold Trust

VanEck Gold Miners

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, VanEck Gold showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Gold Trust

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, IShares Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Gold and IShares Gold

The main advantage of trading using opposite VanEck Gold and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Gold 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 VanEck Gold Miners and iShares Gold Trust 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.