Correlation Between IShares Silver and Sprott Physical

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

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

Diversification Opportunities for IShares Silver and Sprott Physical

0.95

Correlation Coefficient

IShares Silver  Sprott Physical

Almost no diversification

The 3 months correlation between IShares and Sprott is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Silver Bullion 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 IShares Silver 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 iShares Silver Bullion 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 IShares Silver i.e., IShares Silver and Sprott Physical go up and down completely randomly.

Pair Corralation between IShares Silver and Sprott Physical

Assuming the 90 days trading horizon IShares Silver is expected to generate 1.02 times less return on investment than Sprott Physical. In addition to that, IShares Silver is 1.58 times more volatile than Sprott Physical Gold. It trades about 0.2 of its total potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.32 per unit of volatility. If you would invest  2,873  in Sprott Physical Gold on December 30, 2024 and sell it today you would earn a total of  540.00  from holding Sprott Physical Gold or generate 18.8% return on investment over 90 days.

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

iShares Silver Bullion  vs.  Sprott Physical Gold

iShares Silver Bullion

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Silver Bullion are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, IShares Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sprott Physical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Silver and Sprott Physical

The main advantage of trading using opposite IShares Silver and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Silver 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 iShares Silver Bullion 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.