Correlation Between Davis New and Sprott Gold

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

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

Diversification Opportunities for Davis New and Sprott Gold

0.35

Correlation Coefficient

Davis New  Sprott Gold

Weak diversification

The 3 months correlation between Davis and Sprott is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Davis New York and Sprott Gold Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Gold Equity and Davis New 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 Davis New York 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 Equity has no effect on the direction of Davis New i.e., Davis New and Sprott Gold go up and down completely randomly.

Pair Corralation between Davis New and Sprott Gold

If you would invest  5,734  in Sprott Gold Equity on December 2, 2024 and sell it today you would lose (14.00) from holding Sprott Gold Equity or give up 0.24% of portfolio value over 90 days.

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

Davis New York  vs.  Sprott Gold Equity

Davis New York

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sprott Gold Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Sprott Gold is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davis New and Sprott Gold

The main advantage of trading using opposite Davis New and Sprott Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis New 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 Davis New York and Sprott Gold Equity 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.