Correlation Between Sprott Junior and Sprott Gold

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

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

Diversification Opportunities for Sprott Junior and Sprott Gold

0.98

Correlation Coefficient

Sprott Junior  Sprott Gold

Almost no diversification

The 3 months correlation between Sprott and Sprott is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Gold and Sprott Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Gold Miners and Sprott Junior 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 Junior Gold 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 Miners has no effect on the direction of Sprott Junior i.e., Sprott Junior and Sprott Gold go up and down completely randomly.

Pair Corralation between Sprott Junior and Sprott Gold

Given the investment horizon of 90 days Sprott Junior is expected to generate 1.04 times less return on investment than Sprott Gold. In addition to that, Sprott Junior is 1.12 times more volatile than Sprott Gold Miners. It trades about 0.23 of its total potential returns per unit of risk. Sprott Gold Miners is currently generating about 0.27 per unit of volatility. If you would invest  3,370  in Sprott Gold Miners on December 28, 2024 and sell it today you would earn a total of  394.00  from holding Sprott Gold Miners or generate 11.69% return on investment over 90 days.

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

Sprott Junior Gold  vs.  Sprott Gold Miners

Sprott Junior Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Sprott Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Gold Miners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Miners are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish fundamental indicators, Sprott Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Junior and Sprott Gold

The main advantage of trading using opposite Sprott Junior and Sprott Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Junior 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 Sprott Junior Gold and Sprott Gold Miners 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.