Correlation Between Sprott and Sprott Physical

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

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

Diversification Opportunities for Sprott and Sprott Physical

0.89

Correlation Coefficient

Sprott  Sprott Physical

Very poor diversification

The 3 months correlation between Sprott and Sprott is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Inc and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of Sprott i.e., Sprott and Sprott Physical go up and down completely randomly.

Pair Corralation between Sprott and Sprott Physical

Considering the 90-day investment horizon Sprott Inc is expected to generate 1.9 times more return on investment than Sprott Physical. However, Sprott is 1.9 times more volatile than Sprott Physical Gold. It trades about 0.11 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.07 per unit of risk. If you would invest  3,917  in Sprott Inc on September 4, 2024 and sell it today you would earn a total of  501.00  from holding Sprott Inc or generate 12.79% return on investment over 90 days.

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

Sprott Inc  vs.  Sprott Physical Gold

Sprott Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Sprott demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sprott Physical Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sprott Physical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sprott and Sprott Physical

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

The idea behind Sprott Inc and Sprott Physical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.