Correlation Between GS Physical and Total Stock

By analyzing existing cross correlation between GS Physical Gold and Total Stock Market, you can compare the effects of market volatilities on GS Physical and Total Stock 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 GS Physical with a short position of Total Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of GS Physical and Total Stock.
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Can any of the company-specific risk be diversified away by investing in both GS Physical and Total Stock 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 GS Physical and Total Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for GS Physical and Total Stock

  Correlation Coefficient
GS Physical Gold
Total Stock Market

Good diversification

The 3 months correlation between GS Physical and Total is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding GS Physical Gold and Total Stock Market in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Total Stock Market and GS Physical 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 GS Physical Gold are associated (or correlated) with Total Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Stock Market has no effect on the direction of GS Physical i.e., GS Physical and Total Stock go up and down completely randomly.

Pair Corralation between GS Physical and Total Stock

Given the investment horizon of 90 days GS Physical is expected to generate 2.4 times less return on investment than Total Stock. But when comparing it to its historical volatility, GS Physical Gold is 1.54 times less risky than Total Stock. It trades about 0.03 of its potential returns per unit of risk. Total Stock Market is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  16,480  in Total Stock Market on October 31, 2021 and sell it today you would earn a total of  5,729  from holding Total Stock Market or generate 34.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

GS Physical Gold  vs.  Total Stock Market

 Performance (%) 
GS Physical Gold 
GS Physical Performance
0 of 100
Over the last 90 days GS Physical Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GS Physical is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GS Physical Price Channel

Total Stock Market 
Total Performance
0 of 100
Over the last 90 days Total Stock Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Total Price Channel

GS Physical and Total Stock Volatility Contrast

 Predicted Return Density 

Pair Trading with GS Physical and Total Stock

The main advantage of trading using opposite GS Physical and Total Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GS Physical position performs unexpectedly, Total Stock 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 Total Stock will offset losses from the drop in Total Stock's long position.
The idea behind GS Physical Gold and Total Stock Market 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.

Total Stock Market

Pair trading matchups for Total Stock

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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