Correlation Between Sprott Physical and VanEck Merk

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

By analyzing existing cross correlation between Sprott Physical Silver and VanEck Merk Gold, you can compare the effects of market volatilities on Sprott Physical and VanEck Merk 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 VanEck Merk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and VanEck Merk.

Diversification Opportunities for Sprott Physical and VanEck Merk

0.91

Correlation Coefficient

Sprott Physical  VanEck Merk

Almost no diversification

The 3 months correlation between Sprott and VanEck is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Silver and VanEck Merk Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Merk Gold 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 Silver are associated (or correlated) with VanEck Merk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Merk Gold has no effect on the direction of Sprott Physical i.e., Sprott Physical and VanEck Merk go up and down completely randomly.

Pair Corralation between Sprott Physical and VanEck Merk

Given the investment horizon of 90 days Sprott Physical is expected to generate 1.2 times less return on investment than VanEck Merk. In addition to that, Sprott Physical is 1.98 times more volatile than VanEck Merk Gold. It trades about 0.04 of its total potential returns per unit of risk. VanEck Merk Gold is currently generating about 0.1 per unit of volatility. If you would invest  1,744  in VanEck Merk Gold on September 13, 2024 and sell it today you would earn a total of  853.00  from holding VanEck Merk Gold or generate 48.91% return on investment over 90 days.

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

Sprott Physical Silver  vs.  VanEck Merk Gold

Sprott Physical Silver

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Sprott Physical is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VanEck Merk Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Merk Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Merk 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 VanEck Merk

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

The idea behind Sprott Physical Silver and VanEck Merk Gold 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.