Correlation Between SPDR Gold and Sprott Physical

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

Diversification Opportunities for SPDR Gold and Sprott Physical

0.86

Correlation Coefficient

SPDR Gold  Sprott Physical

Very poor diversification

The 3 months correlation between SPDR and Sprott is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold MiniShares and Sprott Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Silver 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Silver has no effect on the direction of SPDR Gold i.e., SPDR Gold and Sprott Physical go up and down completely randomly.

Pair Corralation between SPDR Gold and Sprott Physical

Given the investment horizon of 90 days SPDR Gold MiniShares is expected to generate 0.59 times more return on investment than Sprott Physical. However, SPDR Gold MiniShares is 1.7 times less risky than Sprott Physical. It trades about 0.01 of its potential returns per unit of risk. Sprott Physical Silver is currently generating about -0.1 per unit of risk. If you would invest  5,214  in SPDR Gold MiniShares on September 27, 2024 and sell it today you would earn a total of  5.00  from holding SPDR Gold MiniShares or generate 0.1% return on investment over 90 days.

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

SPDR Gold MiniShares  vs.  Sprott Physical Silver

SPDR Gold MiniShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sprott Physical Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Physical Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Sprott Physical is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Gold and Sprott Physical

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

The idea behind SPDR Gold MiniShares and Sprott Physical Silver 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.