Correlation Between ETFS Enhanced and ETFS Physical

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

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

Diversification Opportunities for ETFS Enhanced and ETFS Physical

0.0

Correlation Coefficient

ETFS Enhanced  ETFS Physical

Pay attention - limited upside

The 3 months correlation between ETFS and ETFS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Enhanced USD and ETFS Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Physical Gold and ETFS Enhanced 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 ETFS Enhanced USD are associated (or correlated) with ETFS Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Physical Gold has no effect on the direction of ETFS Enhanced i.e., ETFS Enhanced and ETFS Physical go up and down completely randomly.

Pair Corralation between ETFS Enhanced and ETFS Physical

If you would invest  3,870  in ETFS Physical Gold on December 28, 2024 and sell it today you would earn a total of  557.00  from holding ETFS Physical Gold or generate 14.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ETFS Enhanced USD  vs.  ETFS Physical Gold

ETFS Enhanced USD

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS Enhanced USD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ETFS Enhanced is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ETFS Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Physical Gold are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Physical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETFS Enhanced and ETFS Physical

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

The idea behind ETFS Enhanced USD and ETFS Physical Gold 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.