Correlation Between Sprott Focus and Kubota

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

Diversification Opportunities for Sprott Focus and Kubota

-0.78

Correlation Coefficient

Sprott Focus  Kubota

Pay attention - limited upside

The 3 months correlation between Sprott and Kubota is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Sprott Focus i.e., Sprott Focus and Kubota go up and down completely randomly.

Pair Corralation between Sprott Focus and Kubota

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.47 times more return on investment than Kubota. However, Sprott Focus Trust is 2.14 times less risky than Kubota. It trades about 0.03 of its potential returns per unit of risk. Kubota is currently generating about -0.13 per unit of risk. If you would invest  744.00  in Sprott Focus Trust on September 18, 2024 and sell it today you would earn a total of  11.00  from holding Sprott Focus Trust or generate 1.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Sprott Focus Trust  vs.  Kubota

Sprott Focus Trust

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 2 (%) 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.

Kubota

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kubota has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sprott Focus and Kubota

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

The idea behind Sprott Focus Trust and Kubota 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.