Correlation Between IShares Gold and United States

Can any of the company-specific risk be diversified away by investing in both IShares Gold and United States 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 United States 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 United States 12, you can compare the effects of market volatilities on IShares Gold and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Gold and United States.

Diversification Opportunities for IShares Gold and United States

0.16

Correlation Coefficient

IShares Gold  United States

Average diversification

The 3 months correlation between IShares and United is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and United States 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States 12 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States 12 has no effect on the direction of IShares Gold i.e., IShares Gold and United States go up and down completely randomly.

Pair Corralation between IShares Gold and United States

Considering the 90-day investment horizon iShares Gold Trust is expected to generate 0.58 times more return on investment than United States. However, iShares Gold Trust is 1.73 times less risky than United States. It trades about 0.1 of its potential returns per unit of risk. United States 12 is currently generating about 0.02 per unit of risk. If you would invest  4,549  in iShares Gold Trust on October 21, 2024 and sell it today you would earn a total of  550.00  from holding iShares Gold Trust or generate 12.09% return on investment over 90 days.

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

iShares Gold Trust  vs.  United States 12

iShares Gold Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Gold Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Gold is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

United States 12

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States 12 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares Gold and United States

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

The idea behind iShares Gold Trust and United States 12 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.