Correlation Between Sprott Uranium and ProShares

Can any of the company-specific risk be diversified away by investing in both Sprott Uranium and ProShares 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 ProShares 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 ProShares SP 500, you can compare the effects of market volatilities on Sprott Uranium and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Uranium and ProShares.

Diversification Opportunities for Sprott Uranium and ProShares

-0.34

Correlation Coefficient

Sprott Uranium  ProShares

Very good diversification

The 3 months correlation between Sprott and ProShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Uranium Miners and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Sprott Uranium i.e., Sprott Uranium and ProShares go up and down completely randomly.

Pair Corralation between Sprott Uranium and ProShares

Given the investment horizon of 90 days Sprott Uranium Miners is expected to under-perform the ProShares. In addition to that, Sprott Uranium is 2.8 times more volatile than ProShares SP 500. It trades about -0.03 of its total potential returns per unit of risk. ProShares SP 500 is currently generating about 0.1 per unit of volatility. If you would invest  5,575  in ProShares SP 500 on October 9, 2024 and sell it today you would earn a total of  837.00  from holding ProShares SP 500 or generate 15.01% return on investment over 90 days.

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

Sprott Uranium Miners  vs.  ProShares SP 500

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 very healthy basic indicators, Sprott Uranium is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ProShares SP 500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sprott Uranium and ProShares

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

The idea behind Sprott Uranium Miners and ProShares SP 500 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.