Correlation Between Sprott Gold and GraniteShares Gold

Can any of the company-specific risk be diversified away by investing in both Sprott Gold and GraniteShares 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 GraniteShares Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sprott Gold Miners and GraniteShares Gold Trust, you can compare the effects of market volatilities on Sprott Gold and GraniteShares 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 GraniteShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Gold and GraniteShares Gold.

Diversification Opportunities for Sprott Gold and GraniteShares Gold

0.83

Correlation Coefficient

Sprott Gold  GraniteShares Gold

Very poor diversification

The 3 months correlation between Sprott and GraniteShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Miners and GraniteShares Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares Gold Trust 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 Miners are associated (or correlated) with GraniteShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares Gold Trust has no effect on the direction of Sprott Gold i.e., Sprott Gold and GraniteShares Gold go up and down completely randomly.

Pair Corralation between Sprott Gold and GraniteShares Gold

Given the investment horizon of 90 days Sprott Gold Miners is expected to under-perform the GraniteShares Gold. In addition to that, Sprott Gold is 1.84 times more volatile than GraniteShares Gold Trust. It trades about -0.04 of its total potential returns per unit of risk. GraniteShares Gold Trust is currently generating about 0.03 per unit of volatility. If you would invest  2,596  in GraniteShares Gold Trust on October 10, 2024 and sell it today you would earn a total of  34.00  from holding GraniteShares Gold Trust or generate 1.31% return on investment over 90 days.

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

Sprott Gold Miners  vs.  GraniteShares Gold Trust

Sprott Gold Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Gold Miners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sprott Gold is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

GraniteShares Gold Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares Gold Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, GraniteShares Gold is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sprott Gold and GraniteShares Gold

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

The idea behind Sprott Gold Miners and GraniteShares Gold Trust 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.