Correlation Between Sprott Physical and Invesco DB

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

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

Diversification Opportunities for Sprott Physical and Invesco DB

-0.5

Correlation Coefficient

Sprott Physical  Invesco DB

Very good diversification

The 3 months correlation between Sprott and Invesco is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Invesco DB Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Agriculture and Sprott Physical 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 Physical Gold are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Agriculture has no effect on the direction of Sprott Physical i.e., Sprott Physical and Invesco DB go up and down completely randomly.

Pair Corralation between Sprott Physical and Invesco DB

Given the investment horizon of 90 days Sprott Physical Gold is expected to under-perform the Invesco DB. In addition to that, Sprott Physical is 1.04 times more volatile than Invesco DB Agriculture. It trades about -0.08 of its total potential returns per unit of risk. Invesco DB Agriculture is currently generating about 0.03 per unit of volatility. If you would invest  2,571  in Invesco DB Agriculture on September 30, 2024 and sell it today you would earn a total of  14.00  from holding Invesco DB Agriculture or generate 0.54% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Invesco DB Agriculture

Sprott Physical Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Physical Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sprott Physical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco DB Agriculture

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Agriculture are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sprott Physical and Invesco DB

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

The idea behind Sprott Physical Gold and Invesco DB Agriculture 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.