Correlation Between Xtrackers FTSE and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both Xtrackers FTSE and SPDR 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 Xtrackers FTSE and SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers FTSE and SPDR Gold Shares, you can compare the effects of market volatilities on Xtrackers FTSE and SPDR 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 Xtrackers FTSE with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers FTSE and SPDR Gold.
Diversification Opportunities for Xtrackers FTSE and SPDR Gold
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers FTSE and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and Xtrackers FTSE 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 Xtrackers FTSE are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Xtrackers FTSE i.e., Xtrackers FTSE and SPDR Gold go up and down completely randomly.
Pair Corralation between Xtrackers FTSE and SPDR Gold
Assuming the 90 days trading horizon Xtrackers FTSE is expected to generate 2.0 times less return on investment than SPDR Gold. But when comparing it to its historical volatility, Xtrackers FTSE is 1.51 times less risky than SPDR Gold. It trades about 0.14 of its potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 20,734 in SPDR Gold Shares on August 28, 2024 and sell it today you would earn a total of 2,349 from holding SPDR Gold Shares or generate 11.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.75% |
| Values | Daily Returns |
Xtrackers FTSE vs. SPDR Gold Shares
Performance |
| Timeline |
| Xtrackers FTSE |
| SPDR Gold Shares |
Xtrackers FTSE and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers FTSE and SPDR Gold
The main advantage of trading using opposite Xtrackers FTSE and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers FTSE position performs unexpectedly, SPDR 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 SPDR Gold will offset losses from the drop in SPDR Gold's long position.The idea behind Xtrackers FTSE and SPDR Gold Shares 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.| SPDR Gold vs. SPDR Barclays 10 | SPDR Gold vs. SPDR ICE BofA | SPDR Gold vs. SPDR SP Utilities | SPDR Gold vs. SPDR ICE BofA |
Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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