Correlation Between Sprott Focus and Gabelli Healthcare

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

Diversification Opportunities for Sprott Focus and Gabelli Healthcare

0.77

Correlation Coefficient

Sprott Focus  Gabelli Healthcare

Poor diversification

The 3 months correlation between Sprott and Gabelli is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Gabelli Healthcare WellnessRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Healthcare 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 Gabelli Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Healthcare has no effect on the direction of Sprott Focus i.e., Sprott Focus and Gabelli Healthcare go up and down completely randomly.

Pair Corralation between Sprott Focus and Gabelli Healthcare

Given the investment horizon of 90 days Sprott Focus Trust is expected to under-perform the Gabelli Healthcare. In addition to that, Sprott Focus is 1.07 times more volatile than Gabelli Healthcare WellnessRx. It trades about -0.13 of its total potential returns per unit of risk. Gabelli Healthcare WellnessRx is currently generating about -0.08 per unit of volatility. If you would invest  1,033  in Gabelli Healthcare WellnessRx on December 1, 2024 and sell it today you would lose (38.00) from holding Gabelli Healthcare WellnessRx or give up 3.68% of portfolio value over 90 days.

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

Sprott Focus Trust  vs.  Gabelli Healthcare WellnessRx

Sprott Focus Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Focus Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Gabelli Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gabelli Healthcare WellnessRx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gabelli Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sprott Focus and Gabelli Healthcare

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

The idea behind Sprott Focus Trust and Gabelli Healthcare WellnessRx 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.