Correlation Between Gatos Silver and Sprott Physical

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

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

Diversification Opportunities for Gatos Silver and Sprott Physical

0.91

Correlation Coefficient

Gatos Silver  Sprott Physical

Almost no diversification

The 3 months correlation between Gatos and Sprott is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver 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 Gatos Silver 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 Gatos Silver 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 Gatos Silver i.e., Gatos Silver and Sprott Physical go up and down completely randomly.

Pair Corralation between Gatos Silver and Sprott Physical

Assuming the 90 days trading horizon Gatos Silver is expected to under-perform the Sprott Physical. In addition to that, Gatos Silver is 3.03 times more volatile than Sprott Physical Gold. It trades about -0.13 of its total potential returns per unit of risk. Sprott Physical Gold is currently generating about -0.1 per unit of volatility. If you would invest  2,478  in Sprott Physical Gold on October 9, 2024 and sell it today you would lose (56.00) from holding Sprott Physical Gold or give up 2.26% of portfolio value over 90 days.

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

Gatos Silver  vs.  Sprott Physical Gold

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gatos Silver is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sprott Physical Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Physical Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sprott Physical is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gatos Silver and Sprott Physical

The main advantage of trading using opposite Gatos Silver and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gatos Silver 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 Gatos Silver 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.