Correlation Between IShares Gold and VanEck Merk

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

Diversification Opportunities for IShares Gold and VanEck Merk

1.0

Correlation Coefficient

IShares Gold  VanEck Merk

No risk reduction

The 3 months correlation between IShares and VanEck is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and VanEck Merk Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Merk 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 VanEck Merk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Merk Gold has no effect on the direction of IShares Gold i.e., IShares Gold and VanEck Merk go up and down completely randomly.

Pair Corralation between IShares Gold and VanEck Merk

Given the investment horizon of 90 days IShares Gold is expected to generate 1.01 times less return on investment than VanEck Merk. But when comparing it to its historical volatility, iShares Gold Trust is 1.03 times less risky than VanEck Merk. It trades about 0.35 of its potential returns per unit of risk. VanEck Merk Gold is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  2,515  in VanEck Merk Gold on December 29, 2024 and sell it today you would earn a total of  457.00  from holding VanEck Merk Gold or generate 18.17% 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.  VanEck Merk Gold

iShares Gold Trust

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, IShares Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

VanEck Merk Gold

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Merk Gold are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, VanEck Merk showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Gold and VanEck Merk

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

The idea behind iShares Gold Trust and VanEck Merk 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.