Correlation Between Sprott and Goldman Sachs

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

By analyzing existing cross correlation between Sprott Inc and Goldman Sachs Physical, you can compare the effects of market volatilities on Sprott and Goldman Sachs 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 with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott and Goldman Sachs.

Diversification Opportunities for Sprott and Goldman Sachs

0.66

Correlation Coefficient

Sprott  Goldman Sachs

Poor diversification

The 3 months correlation between Sprott and Goldman is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Inc and Goldman Sachs Physical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Physical and Sprott 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 Inc are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Physical has no effect on the direction of Sprott i.e., Sprott and Goldman Sachs go up and down completely randomly.

Pair Corralation between Sprott and Goldman Sachs

Considering the 90-day investment horizon Sprott is expected to generate 1.56 times less return on investment than Goldman Sachs. In addition to that, Sprott is 2.27 times more volatile than Goldman Sachs Physical. It trades about 0.09 of its total potential returns per unit of risk. Goldman Sachs Physical is currently generating about 0.33 per unit of volatility. If you would invest  2,577  in Goldman Sachs Physical on December 28, 2024 and sell it today you would earn a total of  445.00  from holding Goldman Sachs Physical or generate 17.27% return on investment over 90 days.

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

Sprott Inc  vs.  Goldman Sachs Physical

Sprott Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Sprott may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Goldman Sachs Physical

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott and Goldman Sachs

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

The idea behind Sprott Inc and Goldman Sachs Physical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..