Correlation Between Sprott Nickel and IShares Basic
Can any of the company-specific risk be diversified away by investing in both Sprott Nickel and IShares Basic 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 IShares Basic 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 iShares Basic Materials, you can compare the effects of market volatilities on Sprott Nickel and IShares Basic 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 IShares Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Nickel and IShares Basic.
Diversification Opportunities for Sprott Nickel and IShares Basic
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sprott and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Nickel Miners and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic 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 IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of Sprott Nickel i.e., Sprott Nickel and IShares Basic go up and down completely randomly.
Pair Corralation between Sprott Nickel and IShares Basic
Given the investment horizon of 90 days Sprott Nickel Miners is expected to under-perform the IShares Basic. In addition to that, Sprott Nickel is 1.55 times more volatile than iShares Basic Materials. It trades about -0.05 of its total potential returns per unit of risk. iShares Basic Materials is currently generating about 0.04 per unit of volatility. If you would invest 12,583 in iShares Basic Materials on August 27, 2024 and sell it today you would earn a total of 2,099 from holding iShares Basic Materials or generate 16.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.48% |
| Values | Daily Returns |
Sprott Nickel Miners vs. iShares Basic Materials
Performance |
| Timeline |
| Sprott Nickel Miners |
| iShares Basic Materials |
Sprott Nickel and IShares Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Nickel and IShares Basic
The main advantage of trading using opposite Sprott Nickel and IShares Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Nickel position performs unexpectedly, IShares Basic 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 IShares Basic will offset losses from the drop in IShares Basic's long position.The idea behind Sprott Nickel Miners and iShares Basic Materials 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.| IShares Basic vs. iShares Industrials ETF | IShares Basic vs. iShares Consumer Discretionary | IShares Basic vs. iShares Consumer Staples | IShares Basic vs. iShares Telecommunications ETF |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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