Correlation Between IShares Gold and Invesco DB

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

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

Diversification Opportunities for IShares Gold and Invesco DB

-0.07

Correlation Coefficient

IShares Gold  Invesco DB

Good diversification

The 3 months correlation between IShares and Invesco is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and Invesco DB Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Agriculture and IShares 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 iShares Gold Trust are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Agriculture has no effect on the direction of IShares Gold i.e., IShares Gold and Invesco DB go up and down completely randomly.

Pair Corralation between IShares Gold and Invesco DB

Considering the 90-day investment horizon IShares Gold is expected to generate 2.09 times less return on investment than Invesco DB. In addition to that, IShares Gold is 1.25 times more volatile than Invesco DB Agriculture. It trades about 0.06 of its total potential returns per unit of risk. Invesco DB Agriculture is currently generating about 0.16 per unit of volatility. If you would invest  2,534  in Invesco DB Agriculture on September 14, 2024 and sell it today you would earn a total of  212.00  from holding Invesco DB Agriculture or generate 8.37% return on investment over 90 days.

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

iShares Gold Trust  vs.  Invesco DB Agriculture

iShares Gold Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Gold is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco DB Agriculture

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with IShares Gold and Invesco DB

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

The idea behind iShares Gold Trust and Invesco DB Agriculture 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.