Correlation Between IShares Core and Sprott Physical

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

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

Diversification Opportunities for IShares Core and Sprott Physical

0.16

Correlation Coefficient

IShares Core  Sprott Physical

Average diversification

The 3 months correlation between IShares and Sprott is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Sprott Physical Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Uranium and IShares Core 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 iShares Core SP are associated (or correlated) with Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Uranium has no effect on the direction of IShares Core i.e., IShares Core and Sprott Physical go up and down completely randomly.

Pair Corralation between IShares Core and Sprott Physical

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.4 times more return on investment than Sprott Physical. However, iShares Core SP is 2.47 times less risky than Sprott Physical. It trades about -0.09 of its potential returns per unit of risk. Sprott Physical Uranium is currently generating about -0.14 per unit of risk. If you would invest  6,284  in iShares Core SP on December 7, 2024 and sell it today you would lose (338.00) from holding iShares Core SP or give up 5.38% of portfolio value over 90 days.

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

iShares Core SP  vs.  Sprott Physical Uranium

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Sprott Physical Uranium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Physical Uranium 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 April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with IShares Core and Sprott Physical

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

The idea behind iShares Core SP and Sprott Physical Uranium 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.