Correlation Between Sprott Junior and Sprott Lithium
Can any of the company-specific risk be diversified away by investing in both Sprott Junior and Sprott Lithium 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 Sprott Lithium 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 Sprott Lithium Miners, you can compare the effects of market volatilities on Sprott Junior and Sprott Lithium 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 Sprott Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Junior and Sprott Lithium.
Diversification Opportunities for Sprott Junior and Sprott Lithium
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sprott and Sprott is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Copper and Sprott Lithium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Lithium Miners 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 Sprott Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Lithium Miners has no effect on the direction of Sprott Junior i.e., Sprott Junior and Sprott Lithium go up and down completely randomly.
Pair Corralation between Sprott Junior and Sprott Lithium
Given the investment horizon of 90 days Sprott Junior Copper is expected to generate 0.7 times more return on investment than Sprott Lithium. However, Sprott Junior Copper is 1.43 times less risky than Sprott Lithium. It trades about 0.03 of its potential returns per unit of risk. Sprott Lithium Miners is currently generating about -0.05 per unit of risk. If you would invest 1,591 in Sprott Junior Copper on November 1, 2024 and sell it today you would earn a total of 261.00 from holding Sprott Junior Copper or generate 16.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Junior Copper vs. Sprott Lithium Miners
Performance |
| Timeline |
| Sprott Junior Copper |
| Sprott Lithium Miners |
Sprott Junior and Sprott Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Junior and Sprott Lithium
The main advantage of trading using opposite Sprott Junior and Sprott Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Junior position performs unexpectedly, Sprott Lithium 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 Lithium will offset losses from the drop in Sprott Lithium'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 |
| Sprott Lithium vs. Sprott Energy Transition | Sprott Lithium vs. Sprott Junior Copper | Sprott Lithium vs. Sprott Junior Uranium | Sprott Lithium vs. Sprott Nickel Miners |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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