Correlation Between SPDR Gold and IShares Gold

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

Diversification Opportunities for SPDR Gold and IShares Gold

1.0

Correlation Coefficient

SPDR Gold  IShares Gold

No risk reduction

The 3 months correlation between SPDR and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and iShares Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold 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 Shares are associated (or correlated) with IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Trust has no effect on the direction of SPDR Gold i.e., SPDR Gold and IShares Gold go up and down completely randomly.

Pair Corralation between SPDR Gold and IShares Gold

Considering the 90-day investment horizon SPDR Gold is expected to generate 1.04 times less return on investment than IShares Gold. But when comparing it to its historical volatility, SPDR Gold Shares is 1.0 times less risky than IShares Gold. It trades about 0.06 of its potential returns per unit of risk. iShares Gold Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,605  in iShares Gold Trust on September 19, 2024 and sell it today you would earn a total of  32.00  from holding iShares Gold Trust or generate 1.23% 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.  iShares Gold Trust

SPDR Gold Shares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Gold Trust

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with SPDR Gold and IShares Gold

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

The idea behind SPDR Gold Shares and iShares Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.