Correlation Between IShares Gold and Sprott Physical

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

Diversification Opportunities for IShares Gold and Sprott Physical

0.8

Correlation Coefficient

IShares Gold  Sprott Physical

Very poor diversification

The 3 months correlation between IShares and Sprott is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and Sprott Physical Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Platinum 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 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 Platinum has no effect on the direction of IShares Gold i.e., IShares Gold and Sprott Physical go up and down completely randomly.

Pair Corralation between IShares Gold and Sprott Physical

Considering the 90-day investment horizon iShares Gold Trust is expected to generate 0.75 times more return on investment than Sprott Physical. However, iShares Gold Trust is 1.33 times less risky than Sprott Physical. It trades about 0.16 of its potential returns per unit of risk. Sprott Physical Platinum is currently generating about -0.02 per unit of risk. If you would invest  4,979  in iShares Gold Trust on December 2, 2024 and sell it today you would earn a total of  408.00  from holding iShares Gold Trust or generate 8.19% return on investment over 90 days.

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

iShares Gold Trust  vs.  Sprott Physical Platinum

iShares Gold Trust

Risk-Adjusted Performance

Good

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

Sprott Physical Platinum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Physical Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sprott Physical is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Gold and Sprott Physical

The main advantage of trading using opposite IShares Gold and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 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 iShares Gold Trust and Sprott Physical Platinum 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.