Correlation Between Sprott Junior and First Trust
Can any of the company-specific risk be diversified away by investing in both Sprott Junior and First Trust 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 Junior and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Junior Copper and First Trust Materials, you can compare the effects of market volatilities on Sprott Junior and First Trust 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 Junior with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Junior and First Trust.
Diversification Opportunities for Sprott Junior and First Trust
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sprott and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Copper and First Trust Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Materials and Sprott Junior 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 Junior Copper are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Materials has no effect on the direction of Sprott Junior i.e., Sprott Junior and First Trust go up and down completely randomly.
Pair Corralation between Sprott Junior and First Trust
Given the investment horizon of 90 days Sprott Junior Copper is expected to under-perform the First Trust. In addition to that, Sprott Junior is 1.38 times more volatile than First Trust Materials. It trades about -0.15 of its total potential returns per unit of risk. First Trust Materials is currently generating about -0.06 per unit of volatility. If you would invest 6,641 in First Trust Materials on August 29, 2024 and sell it today you would lose (122.00) from holding First Trust Materials or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Junior Copper vs. First Trust Materials
Performance |
| Timeline |
| Sprott Junior Copper |
| First Trust Materials |
Sprott Junior and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Junior and First Trust
The main advantage of trading using opposite Sprott Junior and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Junior position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Sprott Junior vs. Sprott Lithium Miners | Sprott Junior vs. Sprott Energy Transition | Sprott Junior vs. Sprott Junior Uranium | Sprott Junior vs. Sprott Nickel Miners |
| First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Financials | First Trust vs. First Trust Energy |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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