Correlation Between Global Gold and Invesco Gold

Can any of the company-specific risk be diversified away by investing in both Global Gold and Invesco 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 Global Gold and Invesco Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Gold Fund and Invesco Gold Special, you can compare the effects of market volatilities on Global Gold and Invesco 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 Global Gold with a short position of Invesco Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Invesco Gold.

Diversification Opportunities for Global Gold and Invesco Gold

0.98

Correlation Coefficient

Global Gold  Invesco Gold

Almost no diversification

The 3 months correlation between Global and Invesco is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Invesco Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Gold Special and Global 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 Global Gold Fund are associated (or correlated) with Invesco Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Gold Special has no effect on the direction of Global Gold i.e., Global Gold and Invesco Gold go up and down completely randomly.

Pair Corralation between Global Gold and Invesco Gold

Assuming the 90 days horizon Global Gold is expected to generate 1.59 times less return on investment than Invesco Gold. In addition to that, Global Gold is 1.04 times more volatile than Invesco Gold Special. It trades about 0.04 of its total potential returns per unit of risk. Invesco Gold Special is currently generating about 0.07 per unit of volatility. If you would invest  2,645  in Invesco Gold Special on August 31, 2024 and sell it today you would earn a total of  189.00  from holding Invesco Gold Special or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Global Gold Fund  vs.  Invesco Gold Special

Global Gold Fund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Gold Special

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Global Gold and Invesco Gold

The main advantage of trading using opposite Global Gold and Invesco Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, Invesco 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 Invesco Gold will offset losses from the drop in Invesco Gold's long position.

The idea behind Global Gold Fund and Invesco Gold Special 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.