Correlation Between Sprott Gold and Invesco Small

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

Diversification Opportunities for Sprott Gold and Invesco Small

-0.11

Correlation Coefficient

Sprott Gold  Invesco Small

Good diversification

The 3 months correlation between Sprott and Invesco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 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 Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Sprott Gold i.e., Sprott Gold and Invesco Small go up and down completely randomly.

Pair Corralation between Sprott Gold and Invesco Small

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 1.23 times more return on investment than Invesco Small. However, Sprott Gold is 1.23 times more volatile than Invesco Small Cap. It trades about 0.24 of its potential returns per unit of risk. Invesco Small Cap is currently generating about -0.03 per unit of risk. If you would invest  5,174  in Sprott Gold Equity on December 21, 2024 and sell it today you would earn a total of  1,285  from holding Sprott Gold Equity or generate 24.84% return on investment over 90 days.

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

Sprott Gold Equity  vs.  Invesco Small Cap

Sprott Gold Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly sluggish essential indicators, Sprott Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Small Cap

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Sprott Gold Equity and Invesco 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 Transaction History module to view history of all your transactions and understand their impact on performance.