Correlation Between Purpose Gold and IShares Gold

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

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

Diversification Opportunities for Purpose Gold and IShares Gold

0.93

Correlation Coefficient

Purpose Gold  IShares Gold

Almost no diversification

The 3 months correlation between Purpose and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Gold Bullion and iShares Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Bullion and Purpose Gold 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 Purpose Gold Bullion are associated (or correlated) with IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Bullion has no effect on the direction of Purpose Gold i.e., Purpose Gold and IShares Gold go up and down completely randomly.

Pair Corralation between Purpose Gold and IShares Gold

Assuming the 90 days trading horizon Purpose Gold is expected to generate 1.43 times less return on investment than IShares Gold. In addition to that, Purpose Gold is 1.1 times more volatile than iShares Gold Bullion. It trades about 0.11 of its total potential returns per unit of risk. iShares Gold Bullion is currently generating about 0.18 per unit of volatility. If you would invest  2,851  in iShares Gold Bullion on September 3, 2024 and sell it today you would earn a total of  298.00  from holding iShares Gold Bullion or generate 10.45% return on investment over 90 days.

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

Purpose Gold Bullion  vs.  iShares Gold Bullion

Purpose Gold Bullion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Gold Bullion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Purpose Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Gold Bullion

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Bullion are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, IShares Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Purpose Gold and IShares Gold

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

The idea behind Purpose Gold Bullion and iShares Gold Bullion 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.