Correlation Between IShares Gold and Invesco DB
Can any of the company-specific risk be diversified away by investing in both IShares Gold and Invesco DB 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 IShares Gold and Invesco DB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Gold Trust and Invesco DB Base, you can compare the effects of market volatilities on IShares Gold and Invesco DB 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 IShares Gold with a short position of Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Gold and Invesco DB.
Diversification Opportunities for IShares Gold and Invesco DB
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and Invesco DB Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Base and IShares 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 iShares Gold Trust are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Base has no effect on the direction of IShares Gold i.e., IShares Gold and Invesco DB go up and down completely randomly.
Pair Corralation between IShares Gold and Invesco DB
Given the investment horizon of 90 days iShares Gold Trust is expected to generate 0.8 times more return on investment than Invesco DB. However, iShares Gold Trust is 1.26 times less risky than Invesco DB. It trades about 0.09 of its potential returns per unit of risk. Invesco DB Base is currently generating about -0.02 per unit of risk. If you would invest 2,337 in iShares Gold Trust on August 28, 2024 and sell it today you would earn a total of 283.00 from holding iShares Gold Trust or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Gold Trust vs. Invesco DB Base
Performance |
| Timeline |
| iShares Gold Trust |
| Invesco DB Base |
IShares Gold and Invesco DB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Gold and Invesco DB
The main advantage of trading using opposite IShares Gold and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Gold position performs unexpectedly, Invesco DB 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 Invesco DB will offset losses from the drop in Invesco DB's long position.| IShares Gold vs. SPDR Gold MiniShares | IShares Gold vs. Goldman Sachs Physical | IShares Gold vs. GraniteShares Gold Trust | IShares Gold vs. VanEck Merk Gold |
| Invesco DB vs. Aquagold International | Invesco DB vs. Morningstar Unconstrained Allocation | Invesco DB vs. High Yield Municipal Fund | Invesco DB vs. Thrivent High Yield |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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