Correlation Between US Treasury and Sprott Nickel

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

By analyzing existing cross correlation between US Treasury 20 and Sprott Nickel Miners, you can compare the effects of market volatilities on US Treasury and Sprott Nickel 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 US Treasury with a short position of Sprott Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Sprott Nickel.

Diversification Opportunities for US Treasury and Sprott Nickel

0.4

Correlation Coefficient

US Treasury  Sprott Nickel

Very weak diversification

The 3 months correlation between UTWY and Sprott is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 20 and Sprott Nickel Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Nickel Miners and US Treasury 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 US Treasury 20 are associated (or correlated) with Sprott Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Nickel Miners has no effect on the direction of US Treasury i.e., US Treasury and Sprott Nickel go up and down completely randomly.

Pair Corralation between US Treasury and Sprott Nickel

Given the investment horizon of 90 days US Treasury 20 is expected to generate 0.42 times more return on investment than Sprott Nickel. However, US Treasury 20 is 2.41 times less risky than Sprott Nickel. It trades about -0.18 of its potential returns per unit of risk. Sprott Nickel Miners is currently generating about -0.08 per unit of risk. If you would invest  4,829  in US Treasury 20 on September 14, 2024 and sell it today you would lose (351.00) from holding US Treasury 20 or give up 7.27% of portfolio value over 90 days.

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

US Treasury 20  vs.  Sprott Nickel Miners

US Treasury 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 20 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Sprott Nickel Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Nickel Miners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with US Treasury and Sprott Nickel

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

The idea behind US Treasury 20 and Sprott Nickel 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.