Correlation Between Sprott Physical and Sun Life

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

Diversification Opportunities for Sprott Physical and Sun Life

0.88

Correlation Coefficient

Sprott Physical  Sun Life

Very poor diversification

The 3 months correlation between Sprott and Sun is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Sprott Physical i.e., Sprott Physical and Sun Life go up and down completely randomly.

Pair Corralation between Sprott Physical and Sun Life

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 1.05 times more return on investment than Sun Life. However, Sprott Physical is 1.05 times more volatile than Sun Life Financial. It trades about 0.18 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.07 per unit of risk. If you would invest  3,432  in Sprott Physical Gold on November 29, 2024 and sell it today you would earn a total of  391.00  from holding Sprott Physical Gold or generate 11.39% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Sun Life Financial

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 14 (%) 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 March 2025.

Sun Life Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sprott Physical and Sun Life

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

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