Correlation Between IShares JP and ZKB Gold

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

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

Diversification Opportunities for IShares JP and ZKB Gold

-0.38

Correlation Coefficient

IShares JP  ZKB Gold

Very good diversification

The 3 months correlation between IShares and ZKB is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and ZKB Gold ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZKB Gold ETF and IShares JP 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 JP Morgan are associated (or correlated) with ZKB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZKB Gold ETF has no effect on the direction of IShares JP i.e., IShares JP and ZKB Gold go up and down completely randomly.

Pair Corralation between IShares JP and ZKB Gold

Assuming the 90 days trading horizon IShares JP is expected to generate 5.55 times less return on investment than ZKB Gold. But when comparing it to its historical volatility, iShares JP Morgan is 2.21 times less risky than ZKB Gold. It trades about 0.06 of its potential returns per unit of risk. ZKB Gold ETF is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  207,650  in ZKB Gold ETF on September 28, 2024 and sell it today you would earn a total of  27,550  from holding ZKB Gold ETF or generate 13.27% return on investment over 90 days.

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

iShares JP Morgan  vs.  ZKB Gold ETF

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares JP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ZKB Gold ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZKB Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, ZKB Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares JP and ZKB Gold

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

The idea behind iShares JP Morgan and ZKB Gold ETF 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.