Correlation Between Vanguard Materials and Sprott Nickel

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

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

Diversification Opportunities for Vanguard Materials and Sprott Nickel

0.12

Correlation Coefficient

Vanguard Materials  Sprott Nickel

Average diversification

The 3 months correlation between Vanguard and Sprott is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index 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 Vanguard Materials 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 Vanguard Materials Index 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 Vanguard Materials i.e., Vanguard Materials and Sprott Nickel go up and down completely randomly.

Pair Corralation between Vanguard Materials and Sprott Nickel

Considering the 90-day investment horizon Vanguard Materials Index is expected to generate 0.58 times more return on investment than Sprott Nickel. However, Vanguard Materials Index is 1.73 times less risky than Sprott Nickel. It trades about 0.01 of its potential returns per unit of risk. Sprott Nickel Miners is currently generating about -0.14 per unit of risk. If you would invest  18,610  in Vanguard Materials Index on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Vanguard Materials Index or generate 0.54% return on investment over 90 days.

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

Vanguard Materials Index  vs.  Sprott Nickel Miners

Vanguard Materials Index

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Materials Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Materials is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sprott Nickel Miners

Risk-Adjusted Performance

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 weak performance in the last few months, the Etf's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with Vanguard Materials and Sprott Nickel

The main advantage of trading using opposite Vanguard Materials and Sprott Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Materials 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 Vanguard Materials Index 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.