Correlation Between IShares Core and DB Gold

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

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

Diversification Opportunities for IShares Core and DB Gold

0.45

Correlation Coefficient

IShares Core  DB Gold

Very weak diversification

The 3 months correlation between IShares and DGZ is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and DB Gold Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Short and IShares Core 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 Core SP are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Short has no effect on the direction of IShares Core i.e., IShares Core and DB Gold go up and down completely randomly.

Pair Corralation between IShares Core and DB Gold

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.63 times more return on investment than DB Gold. However, iShares Core SP is 1.59 times less risky than DB Gold. It trades about -0.07 of its potential returns per unit of risk. DB Gold Short is currently generating about -0.08 per unit of risk. If you would invest  59,568  in iShares Core SP on December 27, 2024 and sell it today you would lose (2,606) from holding iShares Core SP or give up 4.37% of portfolio value over 90 days.

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

iShares Core SP  vs.  DB Gold Short

iShares Core SP

Risk-Adjusted Performance

Very Weak

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

DB Gold Short

Risk-Adjusted Performance

Very Weak

Over the last 90 days DB Gold Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Core and DB Gold

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

The idea behind iShares Core SP and DB Gold Short 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.