Correlation Between SPDR Gold and Invesco Agriculture

Can any of the company-specific risk be diversified away by investing in both SPDR Gold and Invesco Agriculture 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 Invesco Agriculture 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 Invesco Agriculture Commodity, you can compare the effects of market volatilities on SPDR Gold and Invesco Agriculture 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 Invesco Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and Invesco Agriculture.

Diversification Opportunities for SPDR Gold and Invesco Agriculture

0.0

Correlation Coefficient

SPDR Gold  Invesco Agriculture

Pay attention - limited upside

The 3 months correlation between SPDR and Invesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold MiniShares and Invesco Agriculture Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Agriculture 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 Invesco Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Agriculture has no effect on the direction of SPDR Gold i.e., SPDR Gold and Invesco Agriculture go up and down completely randomly.

Pair Corralation between SPDR Gold and Invesco Agriculture

Given the investment horizon of 90 days SPDR Gold is expected to generate 2.03 times less return on investment than Invesco Agriculture. In addition to that, SPDR Gold is 1.25 times more volatile than Invesco Agriculture Commodity. It trades about 0.06 of its total potential returns per unit of risk. Invesco Agriculture Commodity is currently generating about 0.16 per unit of volatility. If you would invest  3,662  in Invesco Agriculture Commodity on September 14, 2024 and sell it today you would earn a total of  302.00  from holding Invesco Agriculture Commodity or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SPDR Gold MiniShares  vs.  Invesco Agriculture Commodity

SPDR Gold MiniShares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold MiniShares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Invesco Agriculture

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Invesco Agriculture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Gold and Invesco Agriculture

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

The idea behind SPDR Gold MiniShares and Invesco Agriculture Commodity 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.