Correlation Between SPDR Gold and Xtrackers ShortDAX

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

Diversification Opportunities for SPDR Gold and Xtrackers ShortDAX

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between SPDR and Xtrackers is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and Xtrackers ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX and SPDR 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 SPDR Gold Shares are associated (or correlated) with Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ShortDAX has no effect on the direction of SPDR Gold i.e., SPDR Gold and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between SPDR Gold and Xtrackers ShortDAX

Assuming the 90 days trading horizon SPDR Gold Shares is expected to generate 0.72 times more return on investment than Xtrackers ShortDAX. However, SPDR Gold Shares is 1.38 times less risky than Xtrackers ShortDAX. It trades about 0.51 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about 0.15 per unit of risk. If you would invest  18,280  in SPDR Gold Shares on January 20, 2024 and sell it today you would earn a total of  2,209  from holding SPDR Gold Shares or generate 12.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

SPDR Gold Shares  vs.  Xtrackers ShortDAX

 Performance 
       Timeline  
SPDR Gold Shares 

Risk-Adjusted Performance

28 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SPDR Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.
Xtrackers ShortDAX 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

SPDR Gold and Xtrackers ShortDAX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR Gold and Xtrackers ShortDAX

The main advantage of trading using opposite SPDR Gold and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold position performs unexpectedly, Xtrackers ShortDAX 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 Xtrackers ShortDAX will offset losses from the drop in Xtrackers ShortDAX's long position.
The idea behind SPDR Gold Shares and Xtrackers ShortDAX 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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