Correlation Between IShares Gold and Gold Portfolio

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

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

Diversification Opportunities for IShares Gold and Gold Portfolio

0.96

Correlation Coefficient

IShares Gold  Gold Portfolio

Almost no diversification

The 3 months correlation between IShares and Gold is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Strategy and Gold Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Fidelity and IShares 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 iShares Gold Strategy are associated (or correlated) with Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Fidelity has no effect on the direction of IShares Gold i.e., IShares Gold and Gold Portfolio go up and down completely randomly.

Pair Corralation between IShares Gold and Gold Portfolio

Given the investment horizon of 90 days iShares Gold Strategy is expected to generate 0.49 times more return on investment than Gold Portfolio. However, iShares Gold Strategy is 2.06 times less risky than Gold Portfolio. It trades about 0.1 of its potential returns per unit of risk. Gold Portfolio Fidelity is currently generating about 0.03 per unit of risk. If you would invest  4,842  in iShares Gold Strategy on January 24, 2024 and sell it today you would earn a total of  1,260  from holding iShares Gold Strategy or generate 26.02% return on investment over 90 days.

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

iShares Gold Strategy  vs.  Gold Portfolio Fidelity

iShares Gold Strategy

Risk-Adjusted Performance

21 of 100

Solid

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

Gold Portfolio Fidelity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Portfolio Fidelity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Gold Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Gold and Gold Portfolio

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

The idea behind iShares Gold Strategy and Gold Portfolio Fidelity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.