Correlation Between IShares Telecommunicatio and DB Gold

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

Diversification Opportunities for IShares Telecommunicatio and DB Gold

-0.45

Correlation Coefficient

IShares Telecommunicatio  DB Gold

Very good diversification

The 3 months correlation between IShares and DGP is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and DB Gold Double in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Double and IShares Telecommunicatio 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 Telecommunications ETF 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 Double has no effect on the direction of IShares Telecommunicatio i.e., IShares Telecommunicatio and DB Gold go up and down completely randomly.

Pair Corralation between IShares Telecommunicatio and DB Gold

Considering the 90-day investment horizon IShares Telecommunicatio is expected to generate 3.29 times less return on investment than DB Gold. But when comparing it to its historical volatility, iShares Telecommunications ETF is 1.76 times less risky than DB Gold. It trades about 0.04 of its potential returns per unit of risk. DB Gold Double is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,823  in DB Gold Double on October 3, 2024 and sell it today you would earn a total of  2,847  from holding DB Gold Double or generate 74.47% return on investment over 90 days.

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

iShares Telecommunications ETF  vs.  DB Gold Double

IShares Telecommunicatio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Telecommunications ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, IShares Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DB Gold Double

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Gold Double has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, DB Gold is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Telecommunicatio and DB Gold

The main advantage of trading using opposite IShares Telecommunicatio and DB Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Telecommunicatio 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 Telecommunications ETF and DB Gold Double 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.