Correlation Between Sprott Nickel and First Trust
Can any of the company-specific risk be diversified away by investing in both Sprott Nickel and First Trust 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 Nickel and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Nickel Miners and First Trust Materials, you can compare the effects of market volatilities on Sprott Nickel and First Trust 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 Nickel with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Nickel and First Trust.
Diversification Opportunities for Sprott Nickel and First Trust
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sprott and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Nickel Miners and First Trust Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Materials and Sprott Nickel 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 Nickel Miners are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Materials has no effect on the direction of Sprott Nickel i.e., Sprott Nickel and First Trust go up and down completely randomly.
Pair Corralation between Sprott Nickel and First Trust
Given the investment horizon of 90 days Sprott Nickel Miners is expected to under-perform the First Trust. In addition to that, Sprott Nickel is 1.06 times more volatile than First Trust Materials. It trades about -0.2 of its total potential returns per unit of risk. First Trust Materials is currently generating about -0.04 per unit of volatility. If you would invest 6,621 in First Trust Materials on August 25, 2024 and sell it today you would lose (85.00) from holding First Trust Materials or give up 1.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Nickel Miners vs. First Trust Materials
Performance |
| Timeline |
| Sprott Nickel Miners |
| First Trust Materials |
Sprott Nickel and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Nickel and First Trust
The main advantage of trading using opposite Sprott Nickel and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Nickel position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Sprott Nickel vs. iShares Dividend and | Sprott Nickel vs. Martin Currie Sustainable | Sprott Nickel vs. VictoryShares THB Mid | Sprott Nickel vs. Mast Global Battery |
| First Trust vs. Sprott Junior Copper | First Trust vs. Sprott Junior Uranium | First Trust 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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