Correlation Between IShares Core and ZKB Gold

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

By analyzing existing cross correlation between iShares Core SP and ZKB Gold ETF, you can compare the effects of market volatilities on IShares Core and ZKB 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 IShares Core with a short position of ZKB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and ZKB Gold.

Diversification Opportunities for IShares Core and ZKB Gold

0.58

Correlation Coefficient

IShares Core  ZKB Gold

Very weak diversification

The 3 months correlation between IShares and ZKB is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and ZKB Gold ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZKB Gold ETF and IShares Core 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 Core SP are associated (or correlated) with ZKB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZKB Gold ETF has no effect on the direction of IShares Core i.e., IShares Core and ZKB Gold go up and down completely randomly.

Pair Corralation between IShares Core and ZKB Gold

Assuming the 90 days trading horizon IShares Core is expected to generate 1.7 times less return on investment than ZKB Gold. But when comparing it to its historical volatility, iShares Core SP is 1.33 times less risky than ZKB Gold. It trades about 0.09 of its potential returns per unit of risk. ZKB Gold ETF is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  221,350  in ZKB Gold ETF on September 28, 2024 and sell it today you would earn a total of  13,850  from holding ZKB Gold ETF or generate 6.26% return on investment over 90 days.

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

iShares Core SP  vs.  ZKB Gold ETF

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ZKB Gold ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZKB Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, ZKB Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and ZKB Gold

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

The idea behind iShares Core SP and ZKB Gold ETF 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.