Correlation Between United States and IShares Gold

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

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

Diversification Opportunities for United States and IShares Gold

0.26

Correlation Coefficient

United States  IShares Gold

Modest diversification

The 3 months correlation between United and IShares is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding United States Oil and iShares Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Trust and United States 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 United States Oil are associated (or correlated) with IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Trust has no effect on the direction of United States i.e., United States and IShares Gold go up and down completely randomly.

Pair Corralation between United States and IShares Gold

Considering the 90-day investment horizon United States is expected to generate 1.09 times less return on investment than IShares Gold. In addition to that, United States is 1.5 times more volatile than iShares Gold Trust. It trades about 0.11 of its total potential returns per unit of risk. iShares Gold Trust is currently generating about 0.18 per unit of volatility. If you would invest  2,568  in iShares Gold Trust on September 14, 2024 and sell it today you would earn a total of  103.00  from holding iShares Gold Trust or generate 4.01% return on investment over 90 days.

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

United States Oil  vs.  iShares Gold Trust

United States Oil

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Oil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, United States is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 very healthy basic indicators, IShares Gold is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United States and IShares Gold

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

The idea behind United States Oil and iShares Gold Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.