Correlation Between Sprott Nickel and Sprott Energy
Can any of the company-specific risk be diversified away by investing in both Sprott Nickel 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 Nickel 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 Nickel Miners and Sprott Energy Transition, you can compare the effects of market volatilities on Sprott Nickel 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 Nickel with a short position of Sprott Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Nickel and Sprott Energy.
Diversification Opportunities for Sprott Nickel and Sprott Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sprott and Sprott is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Nickel 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 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 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 Nickel i.e., Sprott Nickel and Sprott Energy go up and down completely randomly.
Pair Corralation between Sprott Nickel and Sprott Energy
Given the investment horizon of 90 days Sprott Nickel Miners is expected to under-perform the Sprott Energy. But the etf apears to be less risky and, when comparing its historical volatility, Sprott Nickel Miners is 1.28 times less risky than Sprott Energy. The etf trades about -0.22 of its potential returns per unit of risk. The Sprott Energy Transition is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 1,870 in Sprott Energy Transition on August 27, 2024 and sell it today you would lose (88.00) from holding Sprott Energy Transition or give up 4.71% 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. Sprott Energy Transition
Performance |
| Timeline |
| Sprott Nickel Miners |
| Sprott Energy Transition |
Sprott Nickel and Sprott Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Nickel and Sprott Energy
The main advantage of trading using opposite Sprott Nickel and Sprott Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Nickel 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 Nickel vs. iShares Dividend and | Sprott Nickel vs. Martin Currie Sustainable | Sprott Nickel vs. VictoryShares THB Mid | Sprott Nickel vs. Mast Global Battery |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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