Correlation Between IShares Physical and Sovereign Metals

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

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

Diversification Opportunities for IShares Physical and Sovereign Metals

0.13

Correlation Coefficient

IShares Physical  Sovereign Metals

Average diversification

The 3 months correlation between IShares and Sovereign is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding iShares Physical Silver and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and IShares Physical 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 Physical Silver are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of IShares Physical i.e., IShares Physical and Sovereign Metals go up and down completely randomly.

Pair Corralation between IShares Physical and Sovereign Metals

Assuming the 90 days trading horizon IShares Physical is expected to generate 2.54 times less return on investment than Sovereign Metals. But when comparing it to its historical volatility, iShares Physical Silver is 1.62 times less risky than Sovereign Metals. It trades about 0.07 of its potential returns per unit of risk. Sovereign Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,350  in Sovereign Metals on September 4, 2024 and sell it today you would earn a total of  700.00  from holding Sovereign Metals or generate 20.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

iShares Physical Silver  vs.  Sovereign Metals

iShares Physical Silver

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Physical Silver are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sovereign Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Physical and Sovereign Metals

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

The idea behind iShares Physical Silver and Sovereign Metals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.