Correlation Between Sprott Gold and State Street

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

Diversification Opportunities for Sprott Gold and State Street

-0.32

Correlation Coefficient

Sprott Gold  State Street

Very good diversification

The 3 months correlation between Sprott and State is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of Sprott Gold i.e., Sprott Gold and State Street go up and down completely randomly.

Pair Corralation between Sprott Gold and State Street

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 1.31 times more return on investment than State Street. However, Sprott Gold is 1.31 times more volatile than State Street Smallmid. It trades about -0.18 of its potential returns per unit of risk. State Street Smallmid is currently generating about -0.26 per unit of risk. If you would invest  5,649  in Sprott Gold Equity on October 8, 2024 and sell it today you would lose (350.00) from holding Sprott Gold Equity or give up 6.2% of portfolio value over 90 days.

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

Sprott Gold Equity  vs.  State Street Smallmid

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.

State Street Smallmid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Smallmid are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, State Street 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 State Street

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

The idea behind Sprott Gold Equity and State Street Smallmid 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.