Correlation Between Sprott Nickel and Invesco Global
Can any of the company-specific risk be diversified away by investing in both Sprott Nickel and Invesco Global 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 Invesco Global 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 Invesco Global Water, you can compare the effects of market volatilities on Sprott Nickel and Invesco Global 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 Invesco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Nickel and Invesco Global.
Diversification Opportunities for Sprott Nickel and Invesco Global
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sprott and Invesco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Nickel Miners and Invesco Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Water 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 Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Water has no effect on the direction of Sprott Nickel i.e., Sprott Nickel and Invesco Global go up and down completely randomly.
Pair Corralation between Sprott Nickel and Invesco Global
Given the investment horizon of 90 days Sprott Nickel Miners is expected to under-perform the Invesco Global. In addition to that, Sprott Nickel is 1.98 times more volatile than Invesco Global Water. It trades about -0.21 of its total potential returns per unit of risk. Invesco Global Water is currently generating about -0.13 per unit of volatility. If you would invest 4,305 in Invesco Global Water on August 27, 2024 and sell it today you would lose (177.00) from holding Invesco Global Water or give up 4.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Nickel Miners vs. Invesco Global Water
Performance |
| Timeline |
| Sprott Nickel Miners |
| Invesco Global Water |
Sprott Nickel and Invesco Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Nickel and Invesco Global
The main advantage of trading using opposite Sprott Nickel and Invesco Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Nickel position performs unexpectedly, Invesco Global 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 Invesco Global will offset losses from the drop in Invesco Global's long position.The idea behind Sprott Nickel Miners and Invesco Global Water 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.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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