Correlation Between Sprott and Invesco DB

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

By analyzing existing cross correlation between Sprott Inc and Invesco DB Energy, you can compare the effects of market volatilities on Sprott and Invesco DB 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 Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott and Invesco DB.

Diversification Opportunities for Sprott and Invesco DB

0.37

Correlation Coefficient

Sprott  Invesco DB

Weak diversification

The 3 months correlation between Sprott and Invesco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Inc and Invesco DB Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Energy 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 Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Energy has no effect on the direction of Sprott i.e., Sprott and Invesco DB go up and down completely randomly.

Pair Corralation between Sprott and Invesco DB

Considering the 90-day investment horizon Sprott Inc is expected to generate 1.2 times more return on investment than Invesco DB. However, Sprott is 1.2 times more volatile than Invesco DB Energy. It trades about 0.09 of its potential returns per unit of risk. Invesco DB Energy is currently generating about 0.04 per unit of risk. If you would invest  4,125  in Sprott Inc on September 13, 2024 and sell it today you would earn a total of  428.00  from holding Sprott Inc or generate 10.38% return on investment over 90 days.

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

Sprott Inc  vs.  Invesco DB Energy

Sprott Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Inc are ranked lower than 6 (%) 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 January 2025.

Invesco DB Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sprott and Invesco DB

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

The idea behind Sprott Inc and Invesco DB Energy 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.