Correlation Between IShares Gold and Sprott Physical

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

Diversification Opportunities for IShares Gold and Sprott Physical

0.82

Correlation Coefficient

IShares Gold  Sprott Physical

Very poor diversification

The 3 months correlation between IShares and Sprott is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Bullion and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of IShares Gold i.e., IShares Gold and Sprott Physical go up and down completely randomly.

Pair Corralation between IShares Gold and Sprott Physical

Assuming the 90 days trading horizon IShares Gold is expected to generate 1.55 times less return on investment than Sprott Physical. But when comparing it to its historical volatility, iShares Gold Bullion is 1.07 times less risky than Sprott Physical. It trades about 0.15 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,844  in Sprott Physical Gold on December 1, 2024 and sell it today you would earn a total of  357.00  from holding Sprott Physical Gold or generate 12.55% return on investment over 90 days.

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

iShares Gold Bullion  vs.  Sprott Physical Gold

iShares Gold Bullion

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Bullion are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, IShares Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sprott Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Gold and Sprott Physical

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

The idea behind iShares Gold Bullion and Sprott Physical Gold 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.