Correlation Between SPDR Gold and SPDR Index
Can any of the company-specific risk be diversified away by investing in both SPDR Gold and SPDR Index 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 SPDR Gold and SPDR Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Gold Trust and SPDR Index Shares, you can compare the effects of market volatilities on SPDR Gold and SPDR Index 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 SPDR Gold with a short position of SPDR Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and SPDR Index.
Diversification Opportunities for SPDR Gold and SPDR Index
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and SPDR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Trust and SPDR Index Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Index Shares and SPDR 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 SPDR Gold Trust are associated (or correlated) with SPDR Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Index Shares has no effect on the direction of SPDR Gold i.e., SPDR Gold and SPDR Index go up and down completely randomly.
Pair Corralation between SPDR Gold and SPDR Index
Assuming the 90 days trading horizon SPDR Gold Trust is expected to generate 2.03 times more return on investment than SPDR Index. However, SPDR Gold is 2.03 times more volatile than SPDR Index Shares. It trades about -0.07 of its potential returns per unit of risk. SPDR Index Shares is currently generating about -0.22 per unit of risk. If you would invest 511,880 in SPDR Gold Trust on September 2, 2024 and sell it today you would lose (12,280) from holding SPDR Gold Trust or give up 2.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
SPDR Gold Trust vs. SPDR Index Shares
Performance |
| Timeline |
| SPDR Gold Trust |
| SPDR Index Shares |
SPDR Gold and SPDR Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Gold and SPDR Index
The main advantage of trading using opposite SPDR Gold and SPDR Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold position performs unexpectedly, SPDR Index 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 Index will offset losses from the drop in SPDR Index's long position.| SPDR Gold vs. SPDR Dow Jones | SPDR Gold vs. SPDR SP 500 | SPDR Gold vs. SPDR Series Trust | SPDR Gold vs. SPDR SP Regional |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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