Correlation Between ROYAL CANADIAN and Sprott Physical

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

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

Diversification Opportunities for ROYAL CANADIAN and Sprott Physical

0.55

Correlation Coefficient

ROYAL CANADIAN  Sprott Physical

Very weak diversification

The 3 months correlation between ROYAL and Sprott is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ROYAL CANADIAN MINT and Sprott Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Silver and ROYAL CANADIAN 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 ROYAL CANADIAN MINT 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 Silver has no effect on the direction of ROYAL CANADIAN i.e., ROYAL CANADIAN and Sprott Physical go up and down completely randomly.

Pair Corralation between ROYAL CANADIAN and Sprott Physical

Assuming the 90 days trading horizon ROYAL CANADIAN MINT is expected to generate 1.1 times more return on investment than Sprott Physical. However, ROYAL CANADIAN is 1.1 times more volatile than Sprott Physical Silver. It trades about 0.1 of its potential returns per unit of risk. Sprott Physical Silver is currently generating about 0.11 per unit of risk. If you would invest  2,601  in ROYAL CANADIAN MINT on September 3, 2024 and sell it today you would earn a total of  108.00  from holding ROYAL CANADIAN MINT or generate 4.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	32.81%
Values	Daily Returns

ROYAL CANADIAN MINT  vs.  Sprott Physical Silver

ROYAL CANADIAN MINT

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ROYAL CANADIAN MINT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, ROYAL CANADIAN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sprott Physical Silver

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Silver are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ROYAL CANADIAN and Sprott Physical

The main advantage of trading using opposite ROYAL CANADIAN and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROYAL CANADIAN 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 ROYAL CANADIAN MINT and Sprott Physical Silver 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.