Correlation Between Sprott Junior and Sprott Lithium

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

By analyzing existing cross correlation between Sprott Junior Copper and Sprott Lithium Miners, you can compare the effects of market volatilities on Sprott Junior and Sprott Lithium 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 Junior with a short position of Sprott Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Junior and Sprott Lithium.

Diversification Opportunities for Sprott Junior and Sprott Lithium

-0.28

Correlation Coefficient

Sprott Junior  Sprott Lithium

Very good diversification

The 3 months correlation between Sprott and Sprott is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Copper and Sprott Lithium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Lithium Miners and Sprott Junior 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 Junior Copper are associated (or correlated) with Sprott Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Lithium Miners has no effect on the direction of Sprott Junior i.e., Sprott Junior and Sprott Lithium go up and down completely randomly.

Pair Corralation between Sprott Junior and Sprott Lithium

Given the investment horizon of 90 days Sprott Junior Copper is expected to generate 0.84 times more return on investment than Sprott Lithium. However, Sprott Junior Copper is 1.19 times less risky than Sprott Lithium. It trades about 0.11 of its potential returns per unit of risk. Sprott Lithium Miners is currently generating about -0.04 per unit of risk. If you would invest  1,826  in Sprott Junior Copper on December 28, 2024 and sell it today you would earn a total of  229.00  from holding Sprott Junior Copper or generate 12.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Sprott Junior Copper  vs.  Sprott Lithium Miners

Sprott Junior Copper

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Copper are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sprott Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Lithium Miners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Lithium Miners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sprott Lithium is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sprott Junior and Sprott Lithium

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

The idea behind Sprott Junior Copper and Sprott Lithium Miners 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.