Correlation Between Sprott Nickel and US Treasury

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

By analyzing existing cross correlation between Sprott Nickel Miners and US Treasury 20, you can compare the effects of market volatilities on Sprott Nickel and US Treasury 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 Sprott Nickel with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Nickel and US Treasury.

Diversification Opportunities for Sprott Nickel and US Treasury

0.77

Correlation Coefficient

Sprott Nickel  US Treasury

Poor diversification

The 3 months correlation between Sprott and UTWY is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Nickel Miners and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 and Sprott Nickel 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 Sprott Nickel Miners are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 20 has no effect on the direction of Sprott Nickel i.e., Sprott Nickel and US Treasury go up and down completely randomly.

Pair Corralation between Sprott Nickel and US Treasury

Given the investment horizon of 90 days Sprott Nickel Miners is expected to generate 1.88 times more return on investment than US Treasury. However, Sprott Nickel is 1.88 times more volatile than US Treasury 20. It trades about 0.02 of its potential returns per unit of risk. US Treasury 20 is currently generating about -0.09 per unit of risk. If you would invest  1,058  in Sprott Nickel Miners on October 21, 2024 and sell it today you would earn a total of  3.00  from holding Sprott Nickel Miners or generate 0.28% return on investment over 90 days.

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

Sprott Nickel Miners  vs.  US Treasury 20

Sprott Nickel Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Nickel Miners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

US Treasury 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 20 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, US Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sprott Nickel and US Treasury

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

The idea behind Sprott Nickel Miners and US Treasury 20 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.