Correlation Between North American and Sprott Physical
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Sprott Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and Sprott Physical Gold, you can compare the effects of market volatilities on North American 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 North American with a short position of Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Sprott Physical.
Diversification Opportunities for North American and Sprott Physical
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Sprott is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold and North American 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 North American Financial 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 Gold has no effect on the direction of North American i.e., North American and Sprott Physical go up and down completely randomly.
Pair Corralation between North American and Sprott Physical
Assuming the 90 days trading horizon North American Financial is expected to generate 0.81 times more return on investment than Sprott Physical. However, North American Financial is 1.23 times less risky than Sprott Physical. It trades about 0.1 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.05 per unit of risk. If you would invest 352.00 in North American Financial on September 12, 2024 and sell it today you would earn a total of 375.00 from holding North American Financial or generate 106.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. Sprott Physical Gold
Performance |
| Timeline |
| North American Financial |
| Sprott Physical Gold |
North American and Sprott Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Sprott Physical
The main advantage of trading using opposite North American and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Brompton Lifeco Split | North American vs. Prime Dividend Corp | North American vs. Financial 15 Split |
| Sprott Physical vs. Brompton Lifeco Split | Sprott Physical vs. North American Financial | Sprott Physical vs. Prime Dividend Corp | Sprott Physical vs. Financial 15 Split |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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