Correlation Between Gold Bullion and SPDR MSCI

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

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

Diversification Opportunities for Gold Bullion and SPDR MSCI

0.35

Correlation Coefficient

Gold Bullion  SPDR MSCI

Weak diversification

The 3 months correlation between Gold and SPDR is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gold Bullion Securities and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and Gold Bullion 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 Gold Bullion Securities are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of Gold Bullion i.e., Gold Bullion and SPDR MSCI go up and down completely randomly.

Pair Corralation between Gold Bullion and SPDR MSCI

Assuming the 90 days trading horizon Gold Bullion Securities is expected to generate 0.55 times more return on investment than SPDR MSCI. However, Gold Bullion Securities is 1.82 times less risky than SPDR MSCI. It trades about 0.22 of its potential returns per unit of risk. SPDR MSCI Europe is currently generating about 0.0 per unit of risk. If you would invest  22,970  in Gold Bullion Securities on December 28, 2024 and sell it today you would earn a total of  2,990  from holding Gold Bullion Securities or generate 13.02% return on investment over 90 days.

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

Gold Bullion Securities  vs.  SPDR MSCI Europe

Gold Bullion Securities

Risk-Adjusted Performance

Solid

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

SPDR MSCI Europe

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, SPDR MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gold Bullion and SPDR MSCI

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

The idea behind Gold Bullion Securities and SPDR MSCI Europe 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.