Correlation Between Ethereum and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both Ethereum 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 Ethereum and SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethereum and SPDR Gold Shares, you can compare the effects of market volatilities on Ethereum 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 Ethereum with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethereum and SPDR Gold.
Diversification Opportunities for Ethereum and SPDR Gold
Weak diversification
The 3 months correlation between Ethereum and SPDR is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum 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 Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and SPDR Gold go up and down completely randomly.
Pair Corralation between Ethereum and SPDR Gold
Assuming the 90 days trading horizon Ethereum is expected to generate 11.2 times less return on investment than SPDR Gold. In addition to that, Ethereum is 3.96 times more volatile than SPDR Gold Shares. It trades about 0.01 of its total potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.28 per unit of volatility. If you would invest 23,164 in SPDR Gold Shares on October 21, 2024 and sell it today you would earn a total of 1,095 from holding SPDR Gold Shares or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 80.95% |
| Values | Daily Returns |
Ethereum vs. SPDR Gold Shares
Performance |
| Timeline |
| Ethereum |
| SPDR Gold Shares |
Ethereum and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethereum and SPDR Gold
The main advantage of trading using opposite Ethereum and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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 Ethereum 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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