Correlation Between Lion One and Sprott Physical
Can any of the company-specific risk be diversified away by investing in both Lion One 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 Lion One and Sprott Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion One Metals and Sprott Physical Platinum, you can compare the effects of market volatilities on Lion One 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 Lion One with a short position of Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion One and Sprott Physical.
Diversification Opportunities for Lion One and Sprott Physical
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lion and Sprott is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Sprott Physical Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Platinum and Lion One 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 Lion One Metals 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 Platinum has no effect on the direction of Lion One i.e., Lion One and Sprott Physical go up and down completely randomly.
Pair Corralation between Lion One and Sprott Physical
Assuming the 90 days horizon Lion One Metals is expected to under-perform the Sprott Physical. In addition to that, Lion One is 3.27 times more volatile than Sprott Physical Platinum. It trades about -0.15 of its total potential returns per unit of risk. Sprott Physical Platinum is currently generating about -0.29 per unit of volatility. If you would invest 1,438 in Sprott Physical Platinum on September 3, 2024 and sell it today you would lose (98.00) from holding Sprott Physical Platinum or give up 6.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion One Metals vs. Sprott Physical Platinum
Performance |
| Timeline |
| Lion One Metals |
| Sprott Physical Platinum |
Lion One and Sprott Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion One and Sprott Physical
The main advantage of trading using opposite Lion One and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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.The idea behind Lion One Metals and Sprott Physical Platinum 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 Physical vs. Rubicon Organics | Sprott Physical vs. Guru Organic Energy | Sprott Physical vs. Enduro Metals Corp | Sprott Physical vs. Rogers Communications |
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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