Correlation Between SPDR Gold and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPDR Gold and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Gold MiniShares and Dow Jones Industrial, you can compare the effects of market volatilities on SPDR Gold and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and Dow Jones.
Diversification Opportunities for SPDR Gold and Dow Jones
Very weak diversification
The 3 months correlation between SPDR and Dow is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold MiniShares and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 MiniShares are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of SPDR Gold i.e., SPDR Gold and Dow Jones go up and down completely randomly.
Pair Corralation between SPDR Gold and Dow Jones
Given the investment horizon of 90 days SPDR Gold MiniShares is expected to generate 1.29 times more return on investment than Dow Jones. However, SPDR Gold is 1.29 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of risk. If you would invest 3,890 in SPDR Gold MiniShares on September 1, 2024 and sell it today you would earn a total of 1,380 from holding SPDR Gold MiniShares or generate 35.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Gold MiniShares vs. Dow Jones Industrial
Performance |
| Timeline |
SPDR Gold and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SPDR Gold MiniShares
Pair trading matchups for SPDR Gold
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPDR Gold and Dow Jones
The main advantage of trading using opposite SPDR Gold and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| SPDR Gold vs. MicroSectors Gold 3X | SPDR Gold vs. Franklin Responsibly Sourced | SPDR Gold vs. ProShares Ultra Silver | SPDR Gold vs. GraniteShares Gold Trust |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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