Correlation Between Gold Bullion and IShares Physical

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

Diversification Opportunities for Gold Bullion and IShares Physical

0.77

Correlation Coefficient

Gold Bullion  IShares Physical

Poor diversification

The 3 months correlation between Gold and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gold Bullion Securities and iShares Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Physical Silver 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 IShares Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Physical Silver has no effect on the direction of Gold Bullion i.e., Gold Bullion and IShares Physical go up and down completely randomly.

Pair Corralation between Gold Bullion and IShares Physical

Assuming the 90 days trading horizon Gold Bullion Securities is expected to generate 0.48 times more return on investment than IShares Physical. However, Gold Bullion Securities is 2.1 times less risky than IShares Physical. It trades about 0.17 of its potential returns per unit of risk. iShares Physical Silver is currently generating about 0.04 per unit of risk. If you would invest  1,753,900  in Gold Bullion Securities on August 30, 2024 and sell it today you would earn a total of  170,650  from holding Gold Bullion Securities or generate 9.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Gold Bullion Securities  vs.  iShares Physical Silver

Gold Bullion Securities

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Bullion Securities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gold Bullion may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares Physical Silver

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Physical Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Physical is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gold Bullion and IShares Physical

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

The idea behind Gold Bullion Securities and iShares Physical Silver 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.