Correlation Between SPDR SP and USCF Gold
Can any of the company-specific risk be diversified away by investing in both SPDR SP and USCF 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 SPDR SP and USCF Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and USCF Gold Strategy, you can compare the effects of market volatilities on SPDR SP and USCF 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 SPDR SP with a short position of USCF Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and USCF Gold.
Diversification Opportunities for SPDR SP and USCF Gold
Weak diversification
The 3 months correlation between SPDR and USCF is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and USCF Gold Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF Gold Strategy and SPDR SP 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 SP 500 are associated (or correlated) with USCF Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF Gold Strategy has no effect on the direction of SPDR SP i.e., SPDR SP and USCF Gold go up and down completely randomly.
Pair Corralation between SPDR SP and USCF Gold
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.41 times more return on investment than USCF Gold. However, SPDR SP is 1.41 times more volatile than USCF Gold Strategy. It trades about 0.07 of its potential returns per unit of risk. USCF Gold Strategy is currently generating about 0.06 per unit of risk. If you would invest 37,829 in SPDR SP 500 on February 16, 2024 and sell it today you would earn a total of 15,149 from holding SPDR SP 500 or generate 40.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 99.37% |
Values | Daily Returns |
SPDR SP 500 vs. USCF Gold Strategy
Performance |
Timeline |
SPDR SP 500 |
USCF Gold Strategy |
SPDR SP and USCF Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR SP and USCF Gold
The main advantage of trading using opposite SPDR SP and USCF Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, USCF 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 USCF Gold will offset losses from the drop in USCF Gold's long position.SPDR SP vs. BNY Mellon International | SPDR SP vs. BNY Mellon Mid | SPDR SP vs. BNY Mellon ETF | SPDR SP vs. Morningstar Unconstrained Allocation |
Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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