Correlation Between Sprott Physical and CHAR Technologies

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

Diversification Opportunities for Sprott Physical and CHAR Technologies

0.03

Correlation Coefficient

Sprott Physical  CHAR Technologies

Significant diversification

The 3 months correlation between Sprott and CHAR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and CHAR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAR Technologies 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 CHAR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAR Technologies has no effect on the direction of Sprott Physical i.e., Sprott Physical and CHAR Technologies go up and down completely randomly.

Pair Corralation between Sprott Physical and CHAR Technologies

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 0.17 times more return on investment than CHAR Technologies. However, Sprott Physical Gold is 5.85 times less risky than CHAR Technologies. It trades about 0.27 of its potential returns per unit of risk. CHAR Technologies is currently generating about 0.04 per unit of risk. If you would invest  3,396  in Sprott Physical Gold on December 29, 2024 and sell it today you would earn a total of  624.00  from holding Sprott Physical Gold or generate 18.37% return on investment over 90 days.

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

Sprott Physical Gold  vs.  CHAR Technologies

Sprott Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprott Physical displayed solid returns over the last few months and may actually be approaching a breakup point.

CHAR Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHAR Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CHAR Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Physical and CHAR Technologies

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

The idea behind Sprott Physical Gold and CHAR Technologies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.