Correlation Between ZKB Palladium and IShares SP

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

By analyzing existing cross correlation between ZKB Palladium ETF and iShares SP 500, you can compare the effects of market volatilities on ZKB Palladium and IShares SP 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 ZKB Palladium with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZKB Palladium and IShares SP.

Diversification Opportunities for ZKB Palladium and IShares SP

0.71

Correlation Coefficient

ZKB Palladium  IShares SP

Poor diversification

The 3 months correlation between ZKB and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ZKB Palladium ETF and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and ZKB Palladium 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 ZKB Palladium ETF are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of ZKB Palladium i.e., ZKB Palladium and IShares SP go up and down completely randomly.

Pair Corralation between ZKB Palladium and IShares SP

Assuming the 90 days trading horizon ZKB Palladium ETF is expected to generate 2.55 times more return on investment than IShares SP. However, ZKB Palladium is 2.55 times more volatile than iShares SP 500. It trades about 0.22 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.3 per unit of risk. If you would invest  23,000  in ZKB Palladium ETF on April 25, 2025 and sell it today you would earn a total of  6,865  from holding ZKB Palladium ETF or generate 29.85% return on investment over 90 days.

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

ZKB Palladium ETF  vs.  iShares SP 500

ZKB Palladium ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZKB Palladium ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ZKB Palladium showed solid returns over the last few months and may actually be approaching a breakup point.

iShares SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IShares SP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZKB Palladium and IShares SP

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

The idea behind ZKB Palladium ETF and iShares SP 500 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.