Correlation Between The Gold and GraniteShares Gold

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

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

Diversification Opportunities for The Gold and GraniteShares Gold

1.0

Correlation Coefficient

The Gold  GraniteShares Gold

No risk reduction

The 3 months correlation between The and GraniteShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and GraniteShares Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares Gold Trust and The 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 The Gold Bullion are associated (or correlated) with GraniteShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares Gold Trust has no effect on the direction of The Gold i.e., The Gold and GraniteShares Gold go up and down completely randomly.

Pair Corralation between The Gold and GraniteShares Gold

Assuming the 90 days horizon The Gold is expected to generate 1.02 times less return on investment than GraniteShares Gold. In addition to that, The Gold is 1.0 times more volatile than GraniteShares Gold Trust. It trades about 0.27 of its total potential returns per unit of risk. GraniteShares Gold Trust is currently generating about 0.28 per unit of volatility. If you would invest  2,153  in GraniteShares Gold Trust on January 26, 2024 and sell it today you would earn a total of  139.00  from holding GraniteShares Gold Trust or generate 6.46% return on investment over 90 days.

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

The Gold Bullion  vs.  GraniteShares Gold Trust

Gold Bullion

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, The Gold showed solid returns over the last few months and may actually be approaching a breakup point.

GraniteShares Gold Trust

Risk-Adjusted Performance

21 of 100

Solid

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

Pair Trading with The Gold and GraniteShares Gold

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

The idea behind The Gold Bullion and GraniteShares 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.