Correlation Between SPDR Gold and Teucrium Soybean

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

Diversification Opportunities for SPDR Gold and Teucrium Soybean

0.23

Correlation Coefficient

SPDR Gold  Teucrium Soybean

Modest diversification

The 3 months correlation between SPDR and Teucrium is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and Teucrium Soybean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Soybean 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 Teucrium Soybean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Soybean has no effect on the direction of SPDR Gold i.e., SPDR Gold and Teucrium Soybean go up and down completely randomly.

Pair Corralation between SPDR Gold and Teucrium Soybean

Considering the 90-day investment horizon SPDR Gold Shares is expected to generate 0.75 times more return on investment than Teucrium Soybean. However, SPDR Gold Shares is 1.34 times less risky than Teucrium Soybean. It trades about 0.28 of its potential returns per unit of risk. Teucrium Soybean is currently generating about 0.01 per unit of risk. If you would invest  24,307  in SPDR Gold Shares on December 26, 2024 and sell it today you would earn a total of  3,517  from holding SPDR Gold Shares or generate 14.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

SPDR Gold Shares  vs.  Teucrium Soybean

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 22 (%) 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.

Teucrium Soybean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teucrium Soybean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Teucrium Soybean is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Gold and Teucrium Soybean

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

The idea behind SPDR Gold Shares and Teucrium Soybean 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.