Correlation Between Sprott Focus and Golden Agri-Resources

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

By analyzing existing cross correlation between Sprott Focus Trust and Golden Agri Resources, you can compare the effects of market volatilities on Sprott Focus and Golden Agri-Resources 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 Focus with a short position of Golden Agri-Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Focus and Golden Agri-Resources.

Diversification Opportunities for Sprott Focus and Golden Agri-Resources

-0.08

Correlation Coefficient

Sprott Focus  Golden Agri-Resources

Good diversification

The 3 months correlation between Sprott and Golden is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources and Sprott Focus 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 Focus Trust are associated (or correlated) with Golden Agri-Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of Sprott Focus i.e., Sprott Focus and Golden Agri-Resources go up and down completely randomly.

Pair Corralation between Sprott Focus and Golden Agri-Resources

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.34 times more return on investment than Golden Agri-Resources. However, Sprott Focus Trust is 2.91 times less risky than Golden Agri-Resources. It trades about 0.08 of its potential returns per unit of risk. Golden Agri Resources is currently generating about -0.01 per unit of risk. If you would invest  712.00  in Sprott Focus Trust on December 28, 2024 and sell it today you would earn a total of  28.00  from holding Sprott Focus Trust or generate 3.93% return on investment over 90 days.

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

Sprott Focus Trust  vs.  Golden Agri Resources

Sprott Focus Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Golden Agri Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Agri Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Golden Agri-Resources 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 Focus and Golden Agri-Resources

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

The idea behind Sprott Focus Trust and Golden Agri Resources 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.