Correlation Between IShares Basic and Sprott Uranium

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

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

Diversification Opportunities for IShares Basic and Sprott Uranium

0.74

Correlation Coefficient

IShares Basic  Sprott Uranium

Poor diversification

The 3 months correlation between IShares and Sprott is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Basic Materials and Sprott Uranium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Uranium Miners and IShares Basic 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 iShares Basic Materials are associated (or correlated) with Sprott Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Uranium Miners has no effect on the direction of IShares Basic i.e., IShares Basic and Sprott Uranium go up and down completely randomly.

Pair Corralation between IShares Basic and Sprott Uranium

Considering the 90-day investment horizon iShares Basic Materials is expected to generate 0.54 times more return on investment than Sprott Uranium. However, iShares Basic Materials is 1.84 times less risky than Sprott Uranium. It trades about -0.56 of its potential returns per unit of risk. Sprott Uranium Miners is currently generating about -0.48 per unit of risk. If you would invest  14,620  in iShares Basic Materials on September 23, 2024 and sell it today you would lose (1,502) from holding iShares Basic Materials or give up 10.27% of portfolio value over 90 days.

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

iShares Basic Materials  vs.  Sprott Uranium Miners

iShares Basic Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Basic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Sprott Uranium Miners

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Basic and Sprott Uranium

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

The idea behind iShares Basic Materials and Sprott Uranium 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.