Correlation Between IShares Core and IShares Gold

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

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

Diversification Opportunities for IShares Core and IShares Gold

0.5

Correlation Coefficient

IShares Core  IShares Gold

Very weak diversification

The 3 months correlation between IShares and IShares is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX 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 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 SPTSX 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 IShares Core i.e., IShares Core and IShares Gold go up and down completely randomly.

Pair Corralation between IShares Core and IShares Gold

Assuming the 90 days trading horizon iShares Core SPTSX is expected to under-perform the IShares Gold. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SPTSX is 1.25 times less risky than IShares Gold. The etf trades about 0.0 of its potential returns per unit of risk. The iShares Gold Bullion is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,126  in iShares Gold Bullion on December 1, 2024 and sell it today you would earn a total of  347.00  from holding iShares Gold Bullion or generate 11.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

iShares Core SPTSX  vs.  iShares Gold Bullion

iShares Core SPTSX

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SPTSX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Bullion are ranked lower than 15 (%) 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 April 2025.

Pair Trading with IShares Core and IShares Gold

The main advantage of trading using opposite IShares Core and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SPTSX 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.