Correlation Between IShares Gold and Abrdn Physical

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

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

Diversification Opportunities for IShares Gold and Abrdn Physical

0.99

Correlation Coefficient

IShares Gold  Abrdn Physical

No risk reduction

The 3 months correlation between IShares and Abrdn is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and abrdn Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on abrdn Physical Gold and IShares 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 iShares Gold Trust are associated (or correlated) with Abrdn Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of abrdn Physical Gold has no effect on the direction of IShares Gold i.e., IShares Gold and Abrdn Physical go up and down completely randomly.

Pair Corralation between IShares Gold and Abrdn Physical

Considering the 90-day investment horizon IShares Gold is expected to generate 1.09 times less return on investment than Abrdn Physical. But when comparing it to its historical volatility, iShares Gold Trust is 1.02 times less risky than Abrdn Physical. It trades about 0.31 of its potential returns per unit of risk. abrdn Physical Gold is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  2,489  in abrdn Physical Gold on December 28, 2024 and sell it today you would earn a total of  429.00  from holding abrdn Physical Gold or generate 17.24% return on investment over 90 days.

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

iShares Gold Trust  vs.  abrdn Physical Gold

iShares Gold Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

abrdn Physical Gold

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in abrdn Physical Gold are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Abrdn Physical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Gold and Abrdn Physical

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

The idea behind iShares Gold Trust and abrdn Physical Gold 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.