Correlation Between IShares SP and ZKB Gold

Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and ZKB Gold ETF, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of ZKB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and ZKB Gold.

Diversification Opportunities for IShares SP and ZKB Gold

-0.28

Correlation Coefficient

IShares SP  ZKB Gold

Very good diversification

The 3 months correlation between IShares and ZKB is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 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 SP 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 SP 500 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 SP i.e., IShares SP and ZKB Gold go up and down completely randomly.

Pair Corralation between IShares SP and ZKB Gold

Assuming the 90 days trading horizon iShares SP 500 is expected to generate 1.13 times more return on investment than ZKB Gold. However, IShares SP is 1.13 times more volatile than ZKB Gold ETF. It trades about -0.04 of its potential returns per unit of risk. ZKB Gold ETF is currently generating about -0.07 per unit of risk. If you would invest  6,041  in iShares SP 500 on October 9, 2024 and sell it today you would lose (46.00) from holding iShares SP 500 or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

iShares SP 500  vs.  ZKB Gold ETF

iShares SP 500

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ZKB Gold ETF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ZKB Gold ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, ZKB Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares SP and ZKB Gold

The main advantage of trading using opposite IShares SP and ZKB Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP 500 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 CEOs Directory module to screen CEOs from public companies around the world.