Correlation Between SPDR Gold and IPath Series

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

Diversification Opportunities for SPDR Gold and IPath Series

-0.05

Correlation Coefficient

SPDR Gold  IPath Series

Good diversification

The 3 months correlation between SPDR and IPath is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold MiniShares and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B 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 IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of SPDR Gold i.e., SPDR Gold and IPath Series go up and down completely randomly.

Pair Corralation between SPDR Gold and IPath Series

If you would invest  3,599  in SPDR Gold MiniShares on September 14, 2024 and sell it today you would earn a total of  1,647  from holding SPDR Gold MiniShares or generate 45.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SPDR Gold MiniShares  vs.  iPath Series B

SPDR Gold MiniShares

Risk-Adjusted Performance

3 of 100

Insignificant

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

iPath Series B

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IPath Series is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR Gold and IPath Series

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

The idea behind SPDR Gold MiniShares and iPath Series B 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.