Correlation Between ETFS Physical and ETFS Ultra

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

By analyzing existing cross correlation between ETFS Physical Gold and ETFS Ultra Short, you can compare the effects of market volatilities on ETFS Physical and ETFS Ultra 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 ETFS Physical with a short position of ETFS Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Physical and ETFS Ultra.

Diversification Opportunities for ETFS Physical and ETFS Ultra

0.3

Correlation Coefficient

ETFS Physical  ETFS Ultra

Weak diversification

The 3 months correlation between ETFS and ETFS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Physical Gold and ETFS Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Ultra Short and ETFS Physical 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 ETFS Physical Gold are associated (or correlated) with ETFS Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Ultra Short has no effect on the direction of ETFS Physical i.e., ETFS Physical and ETFS Ultra go up and down completely randomly.

Pair Corralation between ETFS Physical and ETFS Ultra

Assuming the 90 days trading horizon ETFS Physical is expected to generate 100.14 times less return on investment than ETFS Ultra. But when comparing it to its historical volatility, ETFS Physical Gold is 128.73 times less risky than ETFS Ultra. It trades about 0.16 of its potential returns per unit of risk. ETFS Ultra Short is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  143.00  in ETFS Ultra Short on September 3, 2024 and sell it today you would earn a total of  2,286  from holding ETFS Ultra Short or generate 1598.6% return on investment over 90 days.

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

ETFS Physical Gold  vs.  ETFS Ultra Short

ETFS Physical Gold

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Physical Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ETFS Ultra Short

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Ultra Short are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Ultra unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETFS Physical and ETFS Ultra

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

The idea behind ETFS Physical Gold and ETFS Ultra Short 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.