Correlation Between SSgA SPDR and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both SSgA SPDR 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 SSgA SPDR and SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSgA SPDR ETFs and SPDR Gold Shares, you can compare the effects of market volatilities on SSgA SPDR 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 SSgA SPDR with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSgA SPDR and SPDR Gold.
Diversification Opportunities for SSgA SPDR and SPDR Gold
Poor diversification
The 3 months correlation between SSgA and SPDR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and SSgA SPDR 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 SSgA SPDR ETFs 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 Shares has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and SPDR Gold go up and down completely randomly.
Pair Corralation between SSgA SPDR and SPDR Gold
Assuming the 90 days trading horizon SSgA SPDR is expected to generate 3.66 times less return on investment than SPDR Gold. But when comparing it to its historical volatility, SSgA SPDR ETFs is 5.07 times less risky than SPDR Gold. It trades about 0.28 of its potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 22,578 in SPDR Gold Shares on September 12, 2024 and sell it today you would earn a total of 1,234 from holding SPDR Gold Shares or generate 5.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SSgA SPDR ETFs vs. SPDR Gold Shares
Performance |
| Timeline |
| SSgA SPDR ETFs |
| SPDR Gold Shares |
SSgA SPDR and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSgA SPDR and SPDR Gold
The main advantage of trading using opposite SSgA SPDR and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSgA SPDR 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.| SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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