Correlation Between SPDR Gold and VanEck Gold

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

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

Diversification Opportunities for SPDR Gold and VanEck Gold

0.98

Correlation Coefficient

SPDR Gold  VanEck Gold

Almost no diversification

The 3 months correlation between SPDR and VanEck is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and VanEck Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Gold Miners 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 Shares are associated (or correlated) with VanEck Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Gold Miners has no effect on the direction of SPDR Gold i.e., SPDR Gold and VanEck Gold go up and down completely randomly.

Pair Corralation between SPDR Gold and VanEck Gold

Considering the 90-day investment horizon SPDR Gold is expected to generate 1.91 times less return on investment than VanEck Gold. But when comparing it to its historical volatility, SPDR Gold Shares is 2.18 times less risky than VanEck Gold. It trades about 0.3 of its potential returns per unit of risk. VanEck Gold Miners is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,426  in VanEck Gold Miners on December 27, 2024 and sell it today you would earn a total of  1,041  from holding VanEck Gold Miners or generate 30.39% return on investment over 90 days.

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

SPDR Gold Shares  vs.  VanEck Gold Miners

SPDR Gold Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal essential indicators, SPDR Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

VanEck Gold Miners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish fundamental indicators, VanEck Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Gold and VanEck Gold

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

The idea behind SPDR Gold Shares and VanEck Gold Miners 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.