Correlation Between Sprott Physical and Capstone Mining

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

By analyzing existing cross correlation between Sprott Physical Gold and Capstone Mining Corp, you can compare the effects of market volatilities on Sprott Physical and Capstone Mining 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 Sprott Physical with a short position of Capstone Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and Capstone Mining.

Diversification Opportunities for Sprott Physical and Capstone Mining

0.46

Correlation Coefficient

Sprott Physical  Capstone Mining

Very weak diversification

The 3 months correlation between Sprott and Capstone is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp and Sprott Physical 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 Sprott Physical Gold are associated (or correlated) with Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Sprott Physical i.e., Sprott Physical and Capstone Mining go up and down completely randomly.

Pair Corralation between Sprott Physical and Capstone Mining

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 0.56 times more return on investment than Capstone Mining. However, Sprott Physical Gold is 1.78 times less risky than Capstone Mining. It trades about -0.1 of its potential returns per unit of risk. Capstone Mining Corp is currently generating about -0.17 per unit of risk. If you would invest  2,512  in Sprott Physical Gold on October 11, 2024 and sell it today you would lose (56.00) from holding Sprott Physical Gold or give up 2.23% of portfolio value over 90 days.

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

Sprott Physical Gold  vs.  Capstone Mining Corp

Sprott Physical Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Physical Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sprott Physical is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Capstone Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sprott Physical and Capstone Mining

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

The idea behind Sprott Physical Gold and Capstone Mining Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.