Correlation Between SPDR Gold and Short Term

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

By analyzing existing cross correlation between SPDR Gold Mini and The Short Term Municipal, you can compare the effects of market volatilities on SPDR Gold and Short Term 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 Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Gold and Short Term.

Diversification Opportunities for SPDR Gold and Short Term

0.41

Correlation Coefficient

SPDR Gold  Short Term

Very weak diversification

The 3 months correlation between SPDR and Short is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Mini and The Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term 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 Mini are associated (or correlated) with Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term has no effect on the direction of SPDR Gold i.e., SPDR Gold and Short Term go up and down completely randomly.

Pair Corralation between SPDR Gold and Short Term

Given the investment horizon of 90 days SPDR Gold Mini is expected to under-perform the Short Term. In addition to that, SPDR Gold is 16.57 times more volatile than The Short Term Municipal. It trades about -0.01 of its total potential returns per unit of risk. The Short Term Municipal is currently generating about 0.31 per unit of volatility. If you would invest  954.00  in The Short Term Municipal on May 3, 2025 and sell it today you would earn a total of  13.00  from holding The Short Term Municipal or generate 1.36% return on investment over 90 days.

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

SPDR Gold Mini  vs.  The Short Term Municipal

SPDR Gold Mini

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Gold Mini has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Short Term Municipal are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Gold and Short Term

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

The idea behind SPDR Gold Mini and The Short Term Municipal 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.