Correlation Between Financial and Sprott Physical
Can any of the company-specific risk be diversified away by investing in both Financial 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 Financial and Sprott Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Sprott Physical Gold, you can compare the effects of market volatilities on Financial 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 Financial with a short position of Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Sprott Physical.
Diversification Opportunities for Financial and Sprott Physical
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Financial and Sprott is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 Financial 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 Financial 15 Split 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 Financial i.e., Financial and Sprott Physical go up and down completely randomly.
Pair Corralation between Financial and Sprott Physical
Assuming the 90 days trading horizon Financial is expected to generate 1.37 times less return on investment than Sprott Physical. But when comparing it to its historical volatility, Financial 15 Split is 1.79 times less risky than Sprott Physical. It trades about 0.06 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,471 in Sprott Physical Gold on September 12, 2024 and sell it today you would earn a total of 1,084 from holding Sprott Physical Gold or generate 43.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Sprott Physical Gold
Performance |
| Timeline |
| Financial 15 Split |
| Sprott Physical Gold |
Financial and Sprott Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Sprott Physical
The main advantage of trading using opposite Financial and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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.| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc 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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