Correlation Between The Gold and IShares Gold

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

Diversification Opportunities for The Gold and IShares Gold

0.99

Correlation Coefficient

The Gold  IShares Gold

No risk reduction

The 3 months correlation between The and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and iShares Gold Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Strategy 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 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 Strategy has no effect on the direction of The Gold i.e., The Gold and IShares Gold go up and down completely randomly.

Pair Corralation between The Gold and IShares Gold

Assuming the 90 days horizon The Gold is expected to generate 1.19 times less return on investment than IShares Gold. In addition to that, The Gold is 1.0 times more volatile than iShares Gold Strategy. It trades about 0.04 of its total potential returns per unit of risk. iShares Gold Strategy is currently generating about 0.05 per unit of volatility. If you would invest  4,934  in iShares Gold Strategy on January 27, 2024 and sell it today you would earn a total of  1,190  from holding iShares Gold Strategy or generate 24.12% 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.  iShares Gold Strategy

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.

iShares Gold Strategy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Strategy are ranked lower than 20 (%) 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.

Pair Trading with The Gold and IShares Gold

The main advantage of trading using opposite The Gold and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Gold 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 The Gold Bullion and iShares Gold Strategy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..