Correlation Between SPDR Gold and SPDR SP
Can any of the company-specific risk be diversified away by investing in both SPDR Gold and SPDR SP 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 SP 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 SP 500, you can compare the effects of market volatilities on SPDR Gold and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and SPDR SP.
Diversification Opportunities for SPDR Gold and SPDR SP
Very poor diversification
The 3 months correlation between SPDR and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Trust and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of SPDR Gold i.e., SPDR Gold and SPDR SP go up and down completely randomly.
Pair Corralation between SPDR Gold and SPDR SP
Assuming the 90 days trading horizon SPDR Gold Trust is expected to under-perform the SPDR SP. In addition to that, SPDR Gold is 1.16 times more volatile than SPDR SP 500. It trades about -0.03 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about 0.24 per unit of volatility. If you would invest 1,163,708 in SPDR SP 500 on August 29, 2024 and sell it today you would earn a total of 77,292 from holding SPDR SP 500 or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Gold Trust vs. SPDR SP 500
Performance |
| Timeline |
| SPDR Gold Trust |
| SPDR SP 500 |
SPDR Gold and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Gold and SPDR SP
The main advantage of trading using opposite SPDR Gold and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.The idea behind SPDR Gold Trust and SPDR SP 500 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.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |