Correlation Between VanEck Merk and IShares Gold

Can any of the company-specific risk be diversified away by investing in both VanEck Merk 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 Merk 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 Merk Gold and iShares Gold Trust, you can compare the effects of market volatilities on VanEck Merk 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 Merk with a short position of IShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Merk and IShares Gold.

Diversification Opportunities for VanEck Merk and IShares Gold

1.0

Correlation Coefficient

VanEck Merk  IShares Gold

No risk reduction

The 3 months correlation between VanEck and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Merk Gold 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 Merk 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 Merk Gold 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 Merk i.e., VanEck Merk and IShares Gold go up and down completely randomly.

Pair Corralation between VanEck Merk and IShares Gold

Given the investment horizon of 90 days VanEck Merk is expected to generate 1.0 times less return on investment than IShares Gold. But when comparing it to its historical volatility, VanEck Merk Gold is 1.02 times less risky than IShares Gold. It trades about 0.19 of its potential returns per unit of risk. iShares Gold Trust is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,246  in iShares Gold Trust on January 30, 2024 and sell it today you would earn a total of  180.00  from holding iShares Gold Trust or generate 4.24% return on investment over 90 days.

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

VanEck Merk Gold  vs.  iShares Gold Trust

VanEck Merk Gold

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Merk Gold are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, VanEck Merk showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Gold Trust

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Merk and IShares Gold

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

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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 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.