Correlation Between Apple and SPDR Gold

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

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

Diversification Opportunities for Apple and SPDR Gold

0.61

Correlation Coefficient

Apple  SPDR Gold

Poor diversification

The 3 months correlation between Apple and SPDR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and Apple 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 Apple Inc are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Apple i.e., Apple and SPDR Gold go up and down completely randomly.

Pair Corralation between Apple and SPDR Gold

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.62 times more return on investment than SPDR Gold. However, Apple Inc is 1.61 times less risky than SPDR Gold. It trades about 0.58 of its potential returns per unit of risk. SPDR Gold Shares is currently generating about -0.13 per unit of risk. If you would invest  22,045  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  2,070  from holding Apple Inc or generate 9.39% return on investment over 90 days.

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

Apple Inc  vs.  SPDR Gold Shares

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPDR Gold Shares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, SPDR Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and SPDR Gold

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

The idea behind Apple Inc and SPDR Gold Shares 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.