Correlation Between VanEck Gold and Sprott Junior

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

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

Diversification Opportunities for VanEck Gold and Sprott Junior

0.99

Correlation Coefficient

VanEck Gold  Sprott Junior

No risk reduction

The 3 months correlation between VanEck and Sprott is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gold Miners and Sprott Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Gold and VanEck Gold 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 VanEck Gold Miners are associated (or correlated) with Sprott Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Gold has no effect on the direction of VanEck Gold i.e., VanEck Gold and Sprott Junior go up and down completely randomly.

Pair Corralation between VanEck Gold and Sprott Junior

Considering the 90-day investment horizon VanEck Gold Miners is expected to generate 0.85 times more return on investment than Sprott Junior. However, VanEck Gold Miners is 1.18 times less risky than Sprott Junior. It trades about 0.29 of its potential returns per unit of risk. Sprott Junior Gold is currently generating about 0.22 per unit of risk. If you would invest  3,377  in VanEck Gold Miners on December 29, 2024 and sell it today you would earn a total of  1,180  from holding VanEck Gold Miners or generate 34.94% return on investment over 90 days.

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

VanEck Gold Miners  vs.  Sprott Junior Gold

VanEck Gold Miners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish fundamental indicators, VanEck Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Junior Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Sprott Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Gold and Sprott Junior

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

The idea behind VanEck Gold Miners and Sprott Junior 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.