Correlation Between ZKB Gold and Invesco Treasury

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Can any of the company-specific risk be diversified away by investing in both ZKB Gold and Invesco Treasury 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 ZKB Gold and Invesco Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZKB Gold ETF and Invesco Treasury Bond, you can compare the effects of market volatilities on ZKB Gold and Invesco Treasury 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 ZKB Gold with a short position of Invesco Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZKB Gold and Invesco Treasury.

Diversification Opportunities for ZKB Gold and Invesco Treasury

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between ZKB and Invesco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding ZKB Gold ETF and Invesco Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Treasury Bond and ZKB 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 ZKB Gold ETF are associated (or correlated) with Invesco Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Treasury Bond has no effect on the direction of ZKB Gold i.e., ZKB Gold and Invesco Treasury go up and down completely randomly.

Pair Corralation between ZKB Gold and Invesco Treasury

Assuming the 90 days trading horizon ZKB Gold ETF is expected to generate 1.77 times more return on investment than Invesco Treasury. However, ZKB Gold is 1.77 times more volatile than Invesco Treasury Bond. It trades about 0.11 of its potential returns per unit of risk. Invesco Treasury Bond is currently generating about -0.14 per unit of risk. If you would invest  221,350  in ZKB Gold ETF on September 29, 2024 and sell it today you would earn a total of  13,850  from holding ZKB Gold ETF or generate 6.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ZKB Gold ETF  vs.  Invesco Treasury Bond

 Performance 
       Timeline  
ZKB Gold ETF 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ZKB Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, ZKB Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Invesco Treasury Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Invesco Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Invesco Treasury is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ZKB Gold and Invesco Treasury Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ZKB Gold and Invesco Treasury

The main advantage of trading using opposite ZKB Gold and Invesco Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZKB Gold position performs unexpectedly, Invesco Treasury 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 Invesco Treasury will offset losses from the drop in Invesco Treasury's long position.
The idea behind ZKB Gold ETF and Invesco Treasury Bond 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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