Correlation Between Sprott Lithium and Sprott Junior
Can any of the company-specific risk be diversified away by investing in both Sprott Lithium and Sprott Junior 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 Junior 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 Junior Gold, you can compare the effects of market volatilities on Sprott Lithium and Sprott Junior 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 Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Lithium and Sprott Junior.
Diversification Opportunities for Sprott Lithium and Sprott Junior
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sprott and Sprott is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Lithium Miners and Sprott Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Gold 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 Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Gold has no effect on the direction of Sprott Lithium i.e., Sprott Lithium and Sprott Junior go up and down completely randomly.
Pair Corralation between Sprott Lithium and Sprott Junior
Given the investment horizon of 90 days Sprott Lithium Miners is expected to generate 0.92 times more return on investment than Sprott Junior. However, Sprott Lithium Miners is 1.09 times less risky than Sprott Junior. It trades about -0.16 of its potential returns per unit of risk. Sprott Junior Gold is currently generating about -0.15 per unit of risk. If you would invest 894.00 in Sprott Lithium Miners on August 27, 2024 and sell it today you would lose (59.00) from holding Sprott Lithium Miners or give up 6.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Lithium Miners vs. Sprott Junior Gold
Performance |
| Timeline |
| Sprott Lithium Miners |
| Sprott Junior Gold |
Sprott Lithium and Sprott Junior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Lithium and Sprott Junior
The main advantage of trading using opposite Sprott Lithium and Sprott Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Lithium position performs unexpectedly, Sprott Junior 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 Junior will offset losses from the drop in Sprott Junior's long position.The idea behind Sprott Lithium Miners and Sprott Junior Gold 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 Junior vs. iShares Silver Trust | Sprott Junior vs. SPDR Gold Shares | Sprott Junior vs. Newmont Goldcorp Corp | Sprott Junior vs. Direxion Daily Gold |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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