Correlation Between Sprott Physical and NexPoint Hospitality
Can any of the company-specific risk be diversified away by investing in both Sprott Physical and NexPoint Hospitality 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 Physical and NexPoint Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Physical Gold and NexPoint Hospitality Trust, you can compare the effects of market volatilities on Sprott Physical and NexPoint Hospitality 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 Physical with a short position of NexPoint Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and NexPoint Hospitality.
Diversification Opportunities for Sprott Physical and NexPoint Hospitality
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sprott and NexPoint is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and NexPoint Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint Hospitality and Sprott Physical 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 Physical Gold are associated (or correlated) with NexPoint Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Hospitality has no effect on the direction of Sprott Physical i.e., Sprott Physical and NexPoint Hospitality go up and down completely randomly.
Pair Corralation between Sprott Physical and NexPoint Hospitality
Assuming the 90 days trading horizon Sprott Physical Gold is expected to under-perform the NexPoint Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Sprott Physical Gold is 158.1 times less risky than NexPoint Hospitality. The stock trades about -0.12 of its potential returns per unit of risk. The NexPoint Hospitality Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1.50 in NexPoint Hospitality Trust on September 2, 2024 and sell it today you would earn a total of 29.50 from holding NexPoint Hospitality Trust or generate 1966.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Physical Gold vs. NexPoint Hospitality Trust
Performance |
| Timeline |
| Sprott Physical Gold |
| NexPoint Hospitality |
Sprott Physical and NexPoint Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Physical and NexPoint Hospitality
The main advantage of trading using opposite Sprott Physical and NexPoint Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical position performs unexpectedly, NexPoint Hospitality 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 NexPoint Hospitality will offset losses from the drop in NexPoint Hospitality's long position.| Sprott Physical vs. Sprott Physical Gold | Sprott Physical vs. Sprott Physical Silver | Sprott Physical vs. Sprott Physical Platinum | Sprott Physical vs. Wheaton Precious Metals |
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Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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