Correlation Between Sprott Junior and Sprott Energy

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

Diversification Opportunities for Sprott Junior and Sprott Energy

0.72

Correlation Coefficient

Sprott Junior  Sprott Energy

Poor diversification

The 3 months correlation between Sprott and Sprott is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Copper and Sprott Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Energy Transition 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Energy Transition has no effect on the direction of Sprott Junior i.e., Sprott Junior and Sprott Energy go up and down completely randomly.

Pair Corralation between Sprott Junior and Sprott Energy

Given the investment horizon of 90 days Sprott Junior is expected to generate 9.33 times less return on investment than Sprott Energy. But when comparing it to its historical volatility, Sprott Junior Copper is 1.18 times less risky than Sprott Energy. It trades about 0.01 of its potential returns per unit of risk. Sprott Energy Transition is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,559  in Sprott Energy Transition on September 16, 2024 and sell it today you would earn a total of  83.00  from holding Sprott Energy Transition or generate 5.32% return on investment over 90 days.

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

Sprott Junior Copper  vs.  Sprott Energy Transition

Sprott Junior Copper

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sprott Junior Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Sprott Junior is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Sprott Energy Transition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Energy Transition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Sprott Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Junior and Sprott Energy

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

The idea behind Sprott Junior Copper and Sprott Energy Transition 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.