Correlation Between SPDR Gold and Invesco QQQ

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

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

Diversification Opportunities for SPDR Gold and Invesco QQQ

0.2

Correlation Coefficient

SPDR Gold  Invesco QQQ

Modest diversification

The 3 months correlation between SPDR and Invesco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Trust and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust and SPDR 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 SPDR Gold Trust are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of SPDR Gold i.e., SPDR Gold and Invesco QQQ go up and down completely randomly.

Pair Corralation between SPDR Gold and Invesco QQQ

Assuming the 90 days trading horizon SPDR Gold Trust is expected to generate 0.77 times more return on investment than Invesco QQQ. However, SPDR Gold Trust is 1.3 times less risky than Invesco QQQ. It trades about 0.15 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.09 per unit of risk. If you would invest  490,500  in SPDR Gold Trust on October 6, 2024 and sell it today you would earn a total of  12,500  from holding SPDR Gold Trust or generate 2.55% return on investment over 90 days.

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

SPDR Gold Trust  vs.  Invesco QQQ Trust

SPDR Gold Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, SPDR Gold may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Invesco QQQ Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco QQQ Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco QQQ showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Gold and Invesco QQQ

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

The idea behind SPDR Gold Trust and Invesco QQQ Trust 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.