Correlation Between Sprott Uranium and Sprott Energy

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

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

Diversification Opportunities for Sprott Uranium and Sprott Energy

0.92

Correlation Coefficient

Sprott Uranium  Sprott Energy

Almost no diversification

The 3 months correlation between Sprott and Sprott is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Uranium Miners and Sprott Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Energy Transition and Sprott Uranium 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 Uranium Miners are associated (or correlated) with Sprott Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Energy Transition has no effect on the direction of Sprott Uranium i.e., Sprott Uranium and Sprott Energy go up and down completely randomly.

Pair Corralation between Sprott Uranium and Sprott Energy

Given the investment horizon of 90 days Sprott Uranium is expected to generate 1.96 times less return on investment than Sprott Energy. In addition to that, Sprott Uranium is 1.63 times more volatile than Sprott Energy Transition. It trades about 0.06 of its total potential returns per unit of risk. Sprott Energy Transition is currently generating about 0.19 per unit of volatility. If you would invest  1,539  in Sprott Energy Transition on October 22, 2024 and sell it today you would earn a total of  76.00  from holding Sprott Energy Transition or generate 4.94% return on investment over 90 days.

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

Sprott Uranium Miners  vs.  Sprott Energy Transition

Sprott Uranium Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Uranium Miners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Sprott Energy Transition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Energy Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Sprott Uranium and Sprott Energy

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

The idea behind Sprott Uranium Miners and Sprott Energy Transition 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.