Correlation Between SPDR Gold and MicroSectors Gold

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

By analyzing existing cross correlation between SPDR Gold MiniShares and MicroSectors Gold 3X, you can compare the effects of market volatilities on SPDR Gold and MicroSectors 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 MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and MicroSectors Gold.

Diversification Opportunities for SPDR Gold and MicroSectors Gold

-1.0

Correlation Coefficient

SPDR Gold  MicroSectors Gold

Pay attention - limited upside

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

Pair Corralation between SPDR Gold and MicroSectors Gold

Given the investment horizon of 90 days SPDR Gold MiniShares is expected to generate 0.35 times more return on investment than MicroSectors Gold. However, SPDR Gold MiniShares is 2.88 times less risky than MicroSectors Gold. It trades about 0.33 of its potential returns per unit of risk. MicroSectors Gold 3X is currently generating about -0.32 per unit of risk. If you would invest  5,165  in SPDR Gold MiniShares on December 30, 2024 and sell it today you would earn a total of  938.00  from holding SPDR Gold MiniShares or generate 18.16% return on investment over 90 days.

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

SPDR Gold MiniShares  vs.  MicroSectors Gold 3X

SPDR Gold MiniShares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold MiniShares are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, SPDR Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

MicroSectors Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with SPDR Gold and MicroSectors Gold

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

The idea behind SPDR Gold MiniShares and MicroSectors Gold 3X 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 Transaction History module to view history of all your transactions and understand their impact on performance.