Correlation Between SPDR SP and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Regional and SPDR Gold Trust, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SPDR Gold.
Diversification Opportunities for SPDR SP and SPDR Gold
Average diversification
The 3 months correlation between SPDR and SPDR is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Regional and SPDR Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Trust and SPDR SP 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 SP Regional 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 Trust has no effect on the direction of SPDR SP i.e., SPDR SP and SPDR Gold go up and down completely randomly.
Pair Corralation between SPDR SP and SPDR Gold
Assuming the 90 days trading horizon SPDR SP Regional is expected to generate 4.73 times more return on investment than SPDR Gold. However, SPDR SP is 4.73 times more volatile than SPDR Gold Trust. It trades about 0.19 of its potential returns per unit of risk. SPDR Gold Trust is currently generating about -0.07 per unit of risk. If you would invest 105,900 in SPDR SP Regional on September 2, 2024 and sell it today you would earn a total of 25,260 from holding SPDR SP Regional or generate 23.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
SPDR SP Regional vs. SPDR Gold Trust
Performance |
| Timeline |
| SPDR SP Regional |
| SPDR Gold Trust |
SPDR SP and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and SPDR Gold
The main advantage of trading using opposite SPDR SP and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. SPDR Dow Jones | SPDR SP vs. SPDR Gold Trust | SPDR SP vs. SPDR SP 500 | SPDR SP vs. SPDR Series Trust |
| SPDR Gold vs. SPDR Dow Jones | SPDR Gold vs. SPDR SP 500 | SPDR Gold vs. SPDR Series Trust | SPDR Gold vs. SPDR SP Regional |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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