Correlation Between SPDR Gold and SSgA SPDR

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

Diversification Opportunities for SPDR Gold and SSgA SPDR

0.86

Correlation Coefficient

SPDR Gold  SSgA SPDR

Very poor diversification

The 3 months correlation between SPDR and SSgA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and SSgA SPDR SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR SP 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR SP has no effect on the direction of SPDR Gold i.e., SPDR Gold and SSgA SPDR go up and down completely randomly.

Pair Corralation between SPDR Gold and SSgA SPDR

Assuming the 90 days trading horizon SPDR Gold Shares is expected to generate 0.82 times more return on investment than SSgA SPDR. However, SPDR Gold Shares is 1.22 times less risky than SSgA SPDR. It trades about 0.21 of its potential returns per unit of risk. SSgA SPDR SP is currently generating about -0.15 per unit of risk. If you would invest  22,578  in SPDR Gold Shares on September 12, 2024 and sell it today you would earn a total of  1,234  from holding SPDR Gold Shares or generate 5.47% return on investment over 90 days.

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

SPDR Gold Shares  vs.  SSgA SPDR SP

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.

SSgA SPDR SP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR SP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, SSgA SPDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Gold and SSgA SPDR

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

The idea behind SPDR Gold Shares and SSgA SPDR SP 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.