Correlation Between MicroSectors Gold and SPDR Gold

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

By analyzing existing cross correlation between MicroSectors Gold 3X and SPDR Gold MiniShares, you can compare the effects of market volatilities on MicroSectors Gold 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 MicroSectors Gold with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and SPDR Gold.

Diversification Opportunities for MicroSectors Gold and SPDR Gold

-0.99

Correlation Coefficient

MicroSectors Gold  SPDR Gold

Pay attention - limited upside

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

Pair Corralation between MicroSectors Gold and SPDR Gold

Given the investment horizon of 90 days MicroSectors Gold 3X is expected to under-perform the SPDR Gold. In addition to that, MicroSectors Gold is 2.97 times more volatile than SPDR Gold MiniShares. It trades about -0.03 of its total potential returns per unit of risk. SPDR Gold MiniShares is currently generating about 0.04 per unit of volatility. If you would invest  5,118  in SPDR Gold MiniShares on September 15, 2024 and sell it today you would earn a total of  128.00  from holding SPDR Gold MiniShares or generate 2.5% return on investment over 90 days.

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

MicroSectors Gold 3X  vs.  SPDR Gold MiniShares

MicroSectors Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, MicroSectors Gold is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SPDR Gold MiniShares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold MiniShares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors Gold and SPDR Gold

The main advantage of trading using opposite MicroSectors Gold and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Gold 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 MicroSectors Gold 3X and SPDR Gold MiniShares 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.