Correlation Between IShares Gold and First Asset

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

By analyzing existing cross correlation between iShares Gold Bullion and First Asset Energy, you can compare the effects of market volatilities on IShares Gold and First Asset 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 First Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Gold and First Asset.

Diversification Opportunities for IShares Gold and First Asset

0.42

Correlation Coefficient

IShares Gold  First Asset

Very weak diversification

The 3 months correlation between IShares and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Bullion and First Asset Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Energy 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 Bullion are associated (or correlated) with First Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Energy has no effect on the direction of IShares Gold i.e., IShares Gold and First Asset go up and down completely randomly.

Pair Corralation between IShares Gold and First Asset

Assuming the 90 days trading horizon iShares Gold Bullion is expected to generate 0.81 times more return on investment than First Asset. However, iShares Gold Bullion is 1.24 times less risky than First Asset. It trades about 0.3 of its potential returns per unit of risk. First Asset Energy is currently generating about 0.14 per unit of risk. If you would invest  3,152  in iShares Gold Bullion on December 30, 2024 and sell it today you would earn a total of  557.00  from holding iShares Gold Bullion or generate 17.67% return on investment over 90 days.

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

iShares Gold Bullion  vs.  First Asset Energy

iShares Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Bullion are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, IShares Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Asset Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Gold and First Asset

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

The idea behind iShares Gold Bullion and First Asset Energy 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.