Correlation Between Sprott Physical and Dividend Select

Can any of the company-specific risk be diversified away by investing in both Sprott Physical and Dividend Select 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 Dividend Select 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 Dividend Select 15, you can compare the effects of market volatilities on Sprott Physical and Dividend Select 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 Dividend Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and Dividend Select.

Diversification Opportunities for Sprott Physical and Dividend Select

0.71

Correlation Coefficient

Sprott Physical  Dividend Select

Poor diversification

The 3 months correlation between Sprott and Dividend is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Dividend Select 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Select 15 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 Dividend Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Select 15 has no effect on the direction of Sprott Physical i.e., Sprott Physical and Dividend Select go up and down completely randomly.

Pair Corralation between Sprott Physical and Dividend Select

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 1.65 times more return on investment than Dividend Select. However, Sprott Physical is 1.65 times more volatile than Dividend Select 15. It trades about 0.14 of its potential returns per unit of risk. Dividend Select 15 is currently generating about 0.2 per unit of risk. If you would invest  3,099  in Sprott Physical Gold on September 3, 2024 and sell it today you would earn a total of  333.00  from holding Sprott Physical Gold or generate 10.75% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Dividend Select 15

Sprott Physical Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dividend Select 15

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Select 15 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Physical and Dividend Select

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

The idea behind Sprott Physical Gold and Dividend Select 15 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..