Correlation Between Sprott Gold and Invesco Gold

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

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

Diversification Opportunities for Sprott Gold and Invesco Gold

1.0

Correlation Coefficient

Sprott Gold  Invesco Gold

No risk reduction

The 3 months correlation between Sprott and Invesco is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Invesco Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Gold Special and Sprott Gold 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 Gold Equity are associated (or correlated) with Invesco Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Gold Special has no effect on the direction of Sprott Gold i.e., Sprott Gold and Invesco Gold go up and down completely randomly.

Pair Corralation between Sprott Gold and Invesco Gold

Assuming the 90 days horizon Sprott Gold is expected to generate 1.01 times less return on investment than Invesco Gold. But when comparing it to its historical volatility, Sprott Gold Equity is 1.0 times less risky than Invesco Gold. It trades about 0.25 of its potential returns per unit of risk. Invesco Gold Special is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,561  in Invesco Gold Special on December 30, 2024 and sell it today you would earn a total of  712.00  from holding Invesco Gold Special or generate 27.8% return on investment over 90 days.

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

Sprott Gold Equity  vs.  Invesco Gold Special

Sprott Gold Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly sluggish essential indicators, Sprott Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Gold Special

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Gold and Invesco Gold

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

The idea behind Sprott Gold Equity and Invesco Gold Special 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.