Correlation Between Applied Blockchain and Sprott Focus

Can any of the company-specific risk be diversified away by investing in both Applied Blockchain and Sprott Focus 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 Applied Blockchain and Sprott Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Blockchain and Sprott Focus Trust, you can compare the effects of market volatilities on Applied Blockchain and Sprott Focus 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 Applied Blockchain with a short position of Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Blockchain and Sprott Focus.

Diversification Opportunities for Applied Blockchain and Sprott Focus

0.75

Correlation Coefficient

Applied Blockchain  Sprott Focus

Poor diversification

The 3 months correlation between Applied and Sprott is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Applied Blockchain and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust and Applied Blockchain 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 Applied Blockchain are associated (or correlated) with Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Applied Blockchain i.e., Applied Blockchain and Sprott Focus go up and down completely randomly.

Pair Corralation between Applied Blockchain and Sprott Focus

Given the investment horizon of 90 days Applied Blockchain is expected to generate 8.13 times more return on investment than Sprott Focus. However, Applied Blockchain is 8.13 times more volatile than Sprott Focus Trust. It trades about 0.13 of its potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.15 per unit of risk. If you would invest  609.00  in Applied Blockchain on September 13, 2024 and sell it today you would earn a total of  284.00  from holding Applied Blockchain or generate 46.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Applied Blockchain  vs.  Sprott Focus Trust

Applied Blockchain

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Blockchain are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sprott Focus Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Sprott Focus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Applied Blockchain and Sprott Focus

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

The idea behind Applied Blockchain and Sprott Focus 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.