Correlation Between SPDR Gold and SPDR Series

Can any of the company-specific risk be diversified away by investing in both SPDR Gold and SPDR Series 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 SPDR Series 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 SPDR Series Trust, you can compare the effects of market volatilities on SPDR Gold and SPDR Series 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 SPDR Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and SPDR Series.

Diversification Opportunities for SPDR Gold and SPDR Series

0.17

Correlation Coefficient

SPDR Gold  SPDR Series

Average diversification

The 3 months correlation between SPDR and SPDR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Trust and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series 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 SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of SPDR Gold i.e., SPDR Gold and SPDR Series go up and down completely randomly.

Pair Corralation between SPDR Gold and SPDR Series

Assuming the 90 days trading horizon SPDR Gold Trust is expected to generate 0.53 times more return on investment than SPDR Series. However, SPDR Gold Trust is 1.88 times less risky than SPDR Series. It trades about 0.05 of its potential returns per unit of risk. SPDR Series Trust is currently generating about -0.02 per unit of risk. If you would invest  477,097  in SPDR Gold Trust on September 29, 2024 and sell it today you would earn a total of  13,782  from holding SPDR Gold Trust or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

SPDR Gold Trust  vs.  SPDR Series Trust

SPDR Gold Trust

Risk-Adjusted Performance

3 of 100

Insignificant

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

SPDR Series Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Gold and SPDR Series

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

The idea behind SPDR Gold Trust and SPDR Series 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.