Correlation Between IShares Global and VanEck Gold

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

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

Diversification Opportunities for IShares Global and VanEck Gold

0.67

Correlation Coefficient

IShares Global  VanEck Gold

Poor diversification

The 3 months correlation between IShares and VanEck is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Timber and VanEck Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Gold Miners and IShares Global 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 Global Timber are associated (or correlated) with VanEck Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Gold Miners has no effect on the direction of IShares Global i.e., IShares Global and VanEck Gold go up and down completely randomly.

Pair Corralation between IShares Global and VanEck Gold

Given the investment horizon of 90 days iShares Global Timber is expected to under-perform the VanEck Gold. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Timber is 1.7 times less risky than VanEck Gold. The etf trades about 0.0 of its potential returns per unit of risk. The VanEck Gold Miners is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,066  in VanEck Gold Miners on January 30, 2024 and sell it today you would earn a total of  392.00  from holding VanEck Gold Miners or generate 12.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

iShares Global Timber  vs.  VanEck Gold Miners

iShares Global Timber

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Timber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Global is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Gold Miners

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, VanEck Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Global and VanEck Gold

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

The idea behind iShares Global Timber and VanEck Gold Miners 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.