Correlation Between Sprott Junior and Sprott Uranium

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

By analyzing existing cross correlation between Sprott Junior Uranium and Sprott Uranium Miners, you can compare the effects of market volatilities on Sprott Junior and Sprott Uranium 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 Junior with a short position of Sprott Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Junior and Sprott Uranium.

Diversification Opportunities for Sprott Junior and Sprott Uranium

0.99

Correlation Coefficient

Sprott Junior  Sprott Uranium

No risk reduction

The 3 months correlation between Sprott and Sprott is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Uranium and Sprott Uranium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Uranium Miners and Sprott Junior 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 Junior Uranium are associated (or correlated) with Sprott Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Uranium Miners has no effect on the direction of Sprott Junior i.e., Sprott Junior and Sprott Uranium go up and down completely randomly.

Pair Corralation between Sprott Junior and Sprott Uranium

Given the investment horizon of 90 days Sprott Junior Uranium is expected to generate 1.3 times more return on investment than Sprott Uranium. However, Sprott Junior is 1.3 times more volatile than Sprott Uranium Miners. It trades about 0.08 of its potential returns per unit of risk. Sprott Uranium Miners is currently generating about 0.07 per unit of risk. If you would invest  1,798  in Sprott Junior Uranium on September 17, 2024 and sell it today you would earn a total of  215.00  from holding Sprott Junior Uranium or generate 11.96% return on investment over 90 days.

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

Sprott Junior Uranium  vs.  Sprott Uranium Miners

Sprott Junior Uranium

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Uranium are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Sprott Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Uranium Miners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Uranium Miners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Sprott Uranium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Junior and Sprott Uranium

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

The idea behind Sprott Junior Uranium and Sprott Uranium Miners 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.