Correlation Between SPDR Gold and Xtrackers

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

Diversification Opportunities for SPDR Gold and Xtrackers

-0.86

Correlation Coefficient

SPDR Gold  Xtrackers

Pay attention - limited upside

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

Pair Corralation between SPDR Gold and Xtrackers

Assuming the 90 days trading horizon SPDR Gold Shares is expected to generate 1.17 times more return on investment than Xtrackers. However, SPDR Gold is 1.17 times more volatile than Xtrackers II . It trades about 0.19 of its potential returns per unit of risk. Xtrackers II is currently generating about 0.0 per unit of risk. If you would invest  20,792  in SPDR Gold Shares on September 5, 2024 and sell it today you would earn a total of  2,341  from holding SPDR Gold Shares or generate 11.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	92.19%
Values	Daily Returns

SPDR Gold Shares  vs.  Xtrackers II

SPDR Gold Shares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SPDR Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR Gold and Xtrackers

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

The idea behind SPDR Gold Shares and Xtrackers II 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.