Correlation Between Sprott Gold and Praxis Value

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

Diversification Opportunities for Sprott Gold and Praxis Value

0.5

Correlation Coefficient

Sprott Gold  Praxis Value

Very weak diversification

The 3 months correlation between Sprott and Praxis is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Praxis Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Value Index 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 Praxis Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Value Index has no effect on the direction of Sprott Gold i.e., Sprott Gold and Praxis Value go up and down completely randomly.

Pair Corralation between Sprott Gold and Praxis Value

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 1.99 times more return on investment than Praxis Value. However, Sprott Gold is 1.99 times more volatile than Praxis Value Index. It trades about 0.04 of its potential returns per unit of risk. Praxis Value Index is currently generating about 0.04 per unit of risk. If you would invest  4,282  in Sprott Gold Equity on October 26, 2024 and sell it today you would earn a total of  1,293  from holding Sprott Gold Equity or generate 30.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Sprott Gold Equity  vs.  Praxis Value Index

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 fairly strong essential indicators, Sprott Gold is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Praxis Value Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Praxis Value Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Praxis Value 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 Praxis Value

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

The idea behind Sprott Gold Equity and Praxis Value Index 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.