Correlation Between SPDR Gold and SPDR Barclays

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

By analyzing existing cross correlation between SPDR Gold Shares and SPDR Barclays 10, you can compare the effects of market volatilities on SPDR Gold and SPDR Barclays 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 SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and SPDR Barclays.

Diversification Opportunities for SPDR Gold and SPDR Barclays

-0.16

Correlation Coefficient

SPDR Gold  SPDR Barclays

Good diversification

The 3 months correlation between SPDR and SPDR is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and SPDR Barclays 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays 10 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 Shares are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays 10 has no effect on the direction of SPDR Gold i.e., SPDR Gold and SPDR Barclays go up and down completely randomly.

Pair Corralation between SPDR Gold and SPDR Barclays

Assuming the 90 days trading horizon SPDR Gold Shares is expected to generate 1.43 times more return on investment than SPDR Barclays. However, SPDR Gold is 1.43 times more volatile than SPDR Barclays 10. It trades about 0.2 of its potential returns per unit of risk. SPDR Barclays 10 is currently generating about 0.13 per unit of risk. If you would invest  20,726  in SPDR Gold Shares on September 4, 2024 and sell it today you would earn a total of  2,433  from holding SPDR Gold Shares or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.31%
Values	Daily Returns

SPDR Gold Shares  vs.  SPDR Barclays 10

SPDR Gold Shares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SPDR Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR Barclays 10

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays 10 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR Gold and SPDR Barclays

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

The idea behind SPDR Gold Shares and SPDR Barclays 10 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.