Correlation Between IShares Gold and VanEck Junior

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

Diversification Opportunities for IShares Gold and VanEck Junior

0.82

Correlation Coefficient

IShares Gold  VanEck Junior

Very poor diversification

The 3 months correlation between IShares and VanEck is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Trust and VanEck Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Junior Gold 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 VanEck Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Junior Gold has no effect on the direction of IShares Gold i.e., IShares Gold and VanEck Junior go up and down completely randomly.

Pair Corralation between IShares Gold and VanEck Junior

Considering the 90-day investment horizon IShares Gold is expected to generate 1.86 times less return on investment than VanEck Junior. But when comparing it to its historical volatility, iShares Gold Trust is 2.06 times less risky than VanEck Junior. It trades about 0.04 of its potential returns per unit of risk. VanEck Junior Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,899  in VanEck Junior Gold on September 14, 2024 and sell it today you would earn a total of  185.00  from holding VanEck Junior Gold or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares Gold Trust  vs.  VanEck Junior Gold

iShares Gold Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 3 (%) 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.

VanEck Junior Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Junior Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, VanEck Junior is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IShares Gold and VanEck Junior

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

The idea behind iShares Gold Trust and VanEck Junior Gold 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.