Correlation Between Sprott Physical and FT Cboe

Can any of the company-specific risk be diversified away by investing in both Sprott Physical and FT Cboe 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 FT Cboe 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 FT Cboe Vest, you can compare the effects of market volatilities on Sprott Physical and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and FT Cboe.

Diversification Opportunities for Sprott Physical and FT Cboe

0.98

Correlation Coefficient

Sprott Physical  FT Cboe

Almost no diversification

The 3 months correlation between Sprott and IGLD is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Sprott Physical i.e., Sprott Physical and FT Cboe go up and down completely randomly.

Pair Corralation between Sprott Physical and FT Cboe

Given the investment horizon of 90 days Sprott Physical Gold is expected to generate 1.3 times more return on investment than FT Cboe. However, Sprott Physical is 1.3 times more volatile than FT Cboe Vest. It trades about -0.02 of its potential returns per unit of risk. FT Cboe Vest is currently generating about -0.02 per unit of risk. If you would invest  2,021  in Sprott Physical Gold on September 27, 2024 and sell it today you would lose (8.00) from holding Sprott Physical Gold or give up 0.4% of portfolio value over 90 days.

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

Sprott Physical Gold  vs.  FT Cboe Vest

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

FT Cboe Vest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, FT Cboe is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sprott Physical and FT Cboe

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

The idea behind Sprott Physical Gold and FT Cboe Vest 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.