Correlation Between Sprott and Invesco Quality

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

Diversification Opportunities for Sprott and Invesco Quality

0.33

Correlation Coefficient

Sprott  Invesco Quality

Weak diversification

The 3 months correlation between Sprott and Invesco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Inc and Invesco Quality Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Municipal 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 Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Municipal has no effect on the direction of Sprott i.e., Sprott and Invesco Quality go up and down completely randomly.

Pair Corralation between Sprott and Invesco Quality

Considering the 90-day investment horizon Sprott Inc is expected to generate 3.04 times more return on investment than Invesco Quality. However, Sprott is 3.04 times more volatile than Invesco Quality Municipal. It trades about 0.08 of its potential returns per unit of risk. Invesco Quality Municipal is currently generating about 0.05 per unit of risk. If you would invest  4,167  in Sprott Inc on December 27, 2024 and sell it today you would earn a total of  351.00  from holding Sprott Inc or generate 8.42% 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 Quality Municipal

Sprott Inc

Risk-Adjusted Performance

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 April 2025.

Invesco Quality Municipal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Quality Municipal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco Quality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sprott and Invesco Quality

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

The idea behind Sprott Inc and Invesco Quality Municipal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.