Correlation Between SPDR Gold and IShares Silver

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

By analyzing existing cross correlation between SPDR Gold MiniShares and iShares Silver Trust, you can compare the effects of market volatilities on SPDR Gold and IShares Silver 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 IShares Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and IShares Silver.

Diversification Opportunities for SPDR Gold and IShares Silver

0.98

Correlation Coefficient

SPDR Gold  IShares Silver

Almost no diversification

The 3 months correlation between SPDR and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold MiniShares and iShares Silver Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Silver Trust 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 MiniShares are associated (or correlated) with IShares Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Silver Trust has no effect on the direction of SPDR Gold i.e., SPDR Gold and IShares Silver go up and down completely randomly.

Pair Corralation between SPDR Gold and IShares Silver

Given the investment horizon of 90 days SPDR Gold is expected to generate 1.38 times less return on investment than IShares Silver. But when comparing it to its historical volatility, SPDR Gold MiniShares is 1.91 times less risky than IShares Silver. It trades about 0.18 of its potential returns per unit of risk. iShares Silver Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,210  in iShares Silver Trust on February 5, 2024 and sell it today you would earn a total of  212.00  from holding iShares Silver Trust or generate 9.59% return on investment over 90 days.

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

SPDR Gold MiniShares  vs.  iShares Silver Trust

SPDR Gold MiniShares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold MiniShares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, SPDR Gold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

iShares Silver Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Silver Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, IShares Silver showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Gold and IShares Silver

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

The idea behind SPDR Gold MiniShares and iShares Silver 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 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.