Correlation Between Sprott Physical and Canadian Life

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

Diversification Opportunities for Sprott Physical and Canadian Life

-0.63

Correlation Coefficient

Sprott Physical  Canadian Life

Excellent diversification

The 3 months correlation between Sprott and Canadian is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies 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 Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Sprott Physical i.e., Sprott Physical and Canadian Life go up and down completely randomly.

Pair Corralation between Sprott Physical and Canadian Life

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 0.43 times more return on investment than Canadian Life. However, Sprott Physical Gold is 2.33 times less risky than Canadian Life. It trades about 0.19 of its potential returns per unit of risk. Canadian Life Companies is currently generating about -0.13 per unit of risk. If you would invest  3,491  in Sprott Physical Gold on December 2, 2024 and sell it today you would earn a total of  275.00  from holding Sprott Physical Gold or generate 7.88% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Canadian Life Companies

Sprott Physical Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 11 (%) 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 April 2025.

Canadian Life Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Life Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sprott Physical and Canadian Life

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

The idea behind Sprott Physical Gold and Canadian Life Companies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.