Correlation Between US Global and Sprott Gold

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

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

Diversification Opportunities for US Global and Sprott Gold

0.99

Correlation Coefficient

US Global  Sprott Gold

No risk reduction

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

Pair Corralation between US Global and Sprott Gold

Given the investment horizon of 90 days US Global is expected to generate 1.14 times less return on investment than Sprott Gold. But when comparing it to its historical volatility, US Global GO is 1.01 times less risky than Sprott Gold. It trades about 0.27 of its potential returns per unit of risk. Sprott Gold Miners is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,752  in Sprott Gold Miners on December 28, 2024 and sell it today you would earn a total of  1,031  from holding Sprott Gold Miners or generate 37.46% return on investment over 90 days.

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

US Global GO  vs.  Sprott Gold Miners

US Global GO

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Global GO are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, US Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sprott Gold Miners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Miners are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish fundamental indicators, Sprott Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Global and Sprott Gold

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

The idea behind US Global GO and Sprott Gold Miners 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.