Correlation Between Sprott Lithium and Sprott Energy
Can any of the company-specific risk be diversified away by investing in both Sprott Lithium and Sprott Energy 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 Lithium and Sprott Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Lithium Miners and Sprott Energy Transition, you can compare the effects of market volatilities on Sprott Lithium and Sprott Energy 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 Lithium with a short position of Sprott Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Lithium and Sprott Energy.
Diversification Opportunities for Sprott Lithium and Sprott Energy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sprott and Sprott is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Lithium Miners and Sprott Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Energy Transition and Sprott Lithium 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 Lithium Miners are associated (or correlated) with Sprott Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Energy Transition has no effect on the direction of Sprott Lithium i.e., Sprott Lithium and Sprott Energy go up and down completely randomly.
Pair Corralation between Sprott Lithium and Sprott Energy
Given the investment horizon of 90 days Sprott Lithium Miners is expected to under-perform the Sprott Energy. In addition to that, Sprott Lithium is 1.28 times more volatile than Sprott Energy Transition. It trades about -0.07 of its total potential returns per unit of risk. Sprott Energy Transition is currently generating about 0.01 per unit of volatility. If you would invest 1,570 in Sprott Energy Transition on November 9, 2024 and sell it today you would earn a total of 2.00 from holding Sprott Energy Transition or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Lithium Miners vs. Sprott Energy Transition
Performance |
| Timeline |
| Sprott Lithium Miners |
| Sprott Energy Transition |
Sprott Lithium and Sprott Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Lithium and Sprott Energy
The main advantage of trading using opposite Sprott Lithium and Sprott Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Lithium position performs unexpectedly, Sprott Energy 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 Energy will offset losses from the drop in Sprott Energy's long position.| Sprott Lithium vs. Sprott Energy Transition | Sprott Lithium vs. Sprott Junior Copper | Sprott Lithium vs. Sprott Junior Uranium | Sprott Lithium vs. Sprott Nickel Miners |
| Sprott Energy vs. Sprott Lithium Miners | Sprott Energy vs. Sprott Junior Copper | Sprott Energy vs. Sprott Junior Uranium | Sprott Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |