Correlation Between Sprott Gold and Longleaf Partners

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

Diversification Opportunities for Sprott Gold and Longleaf Partners

0.03

Correlation Coefficient

Sprott Gold  Longleaf Partners

Significant diversification

The 3 months correlation between Sprott and Longleaf is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Longleaf Partners Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners Small 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners Small has no effect on the direction of Sprott Gold i.e., Sprott Gold and Longleaf Partners go up and down completely randomly.

Pair Corralation between Sprott Gold and Longleaf Partners

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 1.72 times more return on investment than Longleaf Partners. However, Sprott Gold is 1.72 times more volatile than Longleaf Partners Small Cap. It trades about 0.03 of its potential returns per unit of risk. Longleaf Partners Small Cap is currently generating about 0.04 per unit of risk. If you would invest  4,515  in Sprott Gold Equity on October 22, 2024 and sell it today you would earn a total of  954.00  from holding Sprott Gold Equity or generate 21.13% return on investment over 90 days.

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

Sprott Gold Equity  vs.  Longleaf Partners Small Cap

Sprott Gold Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Gold Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of sluggish performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Longleaf Partners Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Longleaf Partners Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Longleaf Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sprott Gold and Longleaf Partners

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

The idea behind Sprott Gold Equity and Longleaf Partners Small Cap 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.