Correlation Between IShares Trust and MicroSectors Gold

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

By analyzing existing cross correlation between iShares Trust and MicroSectors Gold 3X, you can compare the effects of market volatilities on IShares Trust and MicroSectors 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 Trust with a short position of MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and MicroSectors Gold.

Diversification Opportunities for IShares Trust and MicroSectors Gold

-0.42

Correlation Coefficient

IShares Trust  MicroSectors Gold

Very good diversification

The 3 months correlation between IShares and MicroSectors is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and MicroSectors Gold 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold and IShares Trust 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 Trust are associated (or correlated) with MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold has no effect on the direction of IShares Trust i.e., IShares Trust and MicroSectors Gold go up and down completely randomly.

Pair Corralation between IShares Trust and MicroSectors Gold

Given the investment horizon of 90 days IShares Trust is expected to generate 2.97 times less return on investment than MicroSectors Gold. But when comparing it to its historical volatility, iShares Trust is 13.88 times less risky than MicroSectors Gold. It trades about 0.1 of its potential returns per unit of risk. MicroSectors Gold 3X is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  405.00  in MicroSectors Gold 3X on May 3, 2025 and sell it today you would earn a total of  3.00  from holding MicroSectors Gold 3X or generate 0.74% return on investment over 90 days.

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

iShares Trust   vs.  MicroSectors Gold 3X

iShares Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MicroSectors Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold 3X are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, MicroSectors Gold is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Trust and MicroSectors Gold

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

The idea behind iShares Trust and MicroSectors Gold 3X 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..