Correlation Between Sprott Gold and Schwab Small

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

Diversification Opportunities for Sprott Gold and Schwab Small

-0.33

Correlation Coefficient

Sprott Gold  Schwab Small

Very good diversification

The 3 months correlation between Sprott and Schwab is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Schwab Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Small Cap 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 Schwab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Small Cap has no effect on the direction of Sprott Gold i.e., Sprott Gold and Schwab Small go up and down completely randomly.

Pair Corralation between Sprott Gold and Schwab Small

Assuming the 90 days horizon Sprott Gold is expected to generate 3.12 times less return on investment than Schwab Small. In addition to that, Sprott Gold is 1.36 times more volatile than Schwab Small Cap Equity. It trades about 0.02 of its total potential returns per unit of risk. Schwab Small Cap Equity is currently generating about 0.09 per unit of volatility. If you would invest  2,187  in Schwab Small Cap Equity on September 13, 2024 and sell it today you would earn a total of  150.00  from holding Schwab Small Cap Equity or generate 6.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sprott Gold Equity  vs.  Schwab Small Cap Equity

Sprott Gold Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Schwab Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Schwab Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Gold and Schwab Small

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

The idea behind Sprott Gold Equity and Schwab Small Cap Equity 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.