Correlation Between E L and Sprott Physical

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

By analyzing existing cross correlation between E L Financial Corp and Sprott Physical Gold, you can compare the effects of market volatilities on E L and Sprott Physical 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 E L with a short position of Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Sprott Physical.

Diversification Opportunities for E L and Sprott Physical

0.49

Correlation Coefficient

E L  Sprott Physical

Very weak diversification

The 3 months correlation between ELF and Sprott is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold and E L 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 E L Financial Corp are associated (or correlated) with Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of E L i.e., E L and Sprott Physical go up and down completely randomly.

Pair Corralation between E L and Sprott Physical

Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.53 times more return on investment than Sprott Physical. However, E L Financial Corp is 1.89 times less risky than Sprott Physical. It trades about 0.1 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.04 per unit of risk. If you would invest  76,003  in E L Financial Corp on December 4, 2024 and sell it today you would earn a total of  68,022  from holding E L Financial Corp or generate 89.5% return on investment over 90 days.

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

E L Financial Corp  vs.  Sprott Physical Gold

E L Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, E L may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 12 (%) 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.

Pair Trading with E L and Sprott Physical

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

The idea behind E L Financial Corp and Sprott Physical Gold 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.