Correlation Between Sprott Physical and IShares MSCI

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

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

Diversification Opportunities for Sprott Physical and IShares MSCI

0.88

Correlation Coefficient

Sprott Physical  IShares MSCI

Very poor diversification

The 3 months correlation between Sprott and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Platinum and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global and Sprott Physical 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 Physical Platinum are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Global has no effect on the direction of Sprott Physical i.e., Sprott Physical and IShares MSCI go up and down completely randomly.

Pair Corralation between Sprott Physical and IShares MSCI

Given the investment horizon of 90 days Sprott Physical is expected to generate 3.13 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Sprott Physical Platinum is 1.76 times less risky than IShares MSCI. It trades about 0.17 of its potential returns per unit of risk. iShares MSCI Global is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,793  in iShares MSCI Global on December 28, 2024 and sell it today you would earn a total of  1,024  from holding iShares MSCI Global or generate 36.66% return on investment over 90 days.

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

Sprott Physical Platinum  vs.  iShares MSCI Global

Sprott Physical Platinum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Platinum are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares MSCI Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IShares MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Physical and IShares MSCI

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

The idea behind Sprott Physical Platinum and iShares MSCI Global 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.