Correlation Between IShares SP and IShares Gold

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

Diversification Opportunities for IShares SP and IShares Gold

0.02

Correlation Coefficient

IShares SP  IShares Gold

Significant diversification

The 3 months correlation between IShares and IShares is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap 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 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 Mid Cap 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 SP i.e., IShares SP and IShares Gold go up and down completely randomly.

Pair Corralation between IShares SP and IShares Gold

Assuming the 90 days trading horizon IShares SP is expected to generate 2.19 times less return on investment than IShares Gold. In addition to that, IShares SP is 1.14 times more volatile than iShares Gold Bullion. It trades about 0.06 of its total potential returns per unit of risk. iShares Gold Bullion is currently generating about 0.16 per unit of volatility. If you would invest  2,289  in iShares Gold Bullion on October 7, 2024 and sell it today you would earn a total of  926.00  from holding iShares Gold Bullion or generate 40.45% return on investment over 90 days.

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

iShares SP Mid Cap  vs.  iShares Gold Bullion

iShares SP Mid

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, IShares SP 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Bullion are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Gold is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares SP and IShares Gold

The main advantage of trading using opposite IShares SP and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP Mid Cap 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.