Correlation Between Embrace Change and Sprott Focus
Can any of the company-specific risk be diversified away by investing in both Embrace Change and Sprott Focus 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 Embrace Change and Sprott Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embrace Change Acquisition and Sprott Focus Trust, you can compare the effects of market volatilities on Embrace Change and Sprott Focus 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 Embrace Change with a short position of Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embrace Change and Sprott Focus.
Diversification Opportunities for Embrace Change and Sprott Focus
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Embrace and Sprott is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Embrace Change i.e., Embrace Change and Sprott Focus go up and down completely randomly.
Pair Corralation between Embrace Change and Sprott Focus
Assuming the 90 days horizon Embrace Change is expected to generate 1.45 times less return on investment than Sprott Focus. But when comparing it to its historical volatility, Embrace Change Acquisition is 1.25 times less risky than Sprott Focus. It trades about 0.03 of its potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 718.00 in Sprott Focus Trust on August 29, 2024 and sell it today you would earn a total of 91.00 from holding Sprott Focus Trust or generate 12.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embrace Change Acquisition vs. Sprott Focus Trust
Performance |
| Timeline |
| Embrace Change Acqui |
| Sprott Focus Trust |
Embrace Change and Sprott Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embrace Change and Sprott Focus
The main advantage of trading using opposite Embrace Change and Sprott Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embrace Change position performs unexpectedly, Sprott Focus 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 Focus will offset losses from the drop in Sprott Focus' long position.The idea behind Embrace Change Acquisition and Sprott Focus Trust 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.| Sprott Focus vs. MFS Investment Grade | Sprott Focus vs. Invesco High Income | Sprott Focus vs. Eaton Vance National | Sprott Focus vs. Nuveen California Select |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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