Correlation Between Sprott Gold and Global X

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

Diversification Opportunities for Sprott Gold and Global X

0.98

Correlation Coefficient

Sprott Gold  Global X

Almost no diversification

The 3 months correlation between Sprott and Global is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Miners and Global X Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Gold 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Gold has no effect on the direction of Sprott Gold i.e., Sprott Gold and Global X go up and down completely randomly.

Pair Corralation between Sprott Gold and Global X

Given the investment horizon of 90 days Sprott Gold Miners is expected to generate 0.86 times more return on investment than Global X. However, Sprott Gold Miners is 1.16 times less risky than Global X. It trades about 0.3 of its potential returns per unit of risk. Global X Gold is currently generating about 0.22 per unit of risk. If you would invest  2,752  in Sprott Gold Miners on December 29, 2024 and sell it today you would earn a total of  1,012  from holding Sprott Gold Miners or generate 36.77% 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 Miners  vs.  Global X Gold

Sprott Gold Miners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Miners are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish fundamental indicators, Sprott Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Gold and Global X

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

The idea behind Sprott Gold Miners and Global X Gold 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.