Correlation Between Sprott Gold and Deutsche Gold

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

Diversification Opportunities for Sprott Gold and Deutsche Gold

1.0

Correlation Coefficient

Sprott Gold  Deutsche Gold

No risk reduction

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

Pair Corralation between Sprott Gold and Deutsche Gold

Assuming the 90 days horizon Sprott Gold is expected to generate 1.02 times less return on investment than Deutsche Gold. But when comparing it to its historical volatility, Sprott Gold Equity is 1.0 times less risky than Deutsche Gold. It trades about 0.04 of its potential returns per unit of risk. Deutsche Gold Precious is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,244  in Deutsche Gold Precious on October 9, 2024 and sell it today you would earn a total of  1,119  from holding Deutsche Gold Precious or generate 26.37% 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.  Deutsche Gold Precious

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 current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Gold Precious has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Deutsche Gold 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 Deutsche Gold

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

The idea behind Sprott Gold Equity and Deutsche Gold Precious 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.