Correlation Between Sprott Physical and Wheaton Precious
Can any of the company-specific risk be diversified away by investing in both Sprott Physical and Wheaton Precious 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 Physical and Wheaton Precious into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Physical Gold and Wheaton Precious Metals, you can compare the effects of market volatilities on Sprott Physical and Wheaton Precious 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 Physical with a short position of Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and Wheaton Precious.
Diversification Opportunities for Sprott Physical and Wheaton Precious
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sprott and Wheaton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals and Sprott Physical 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 Physical Gold are associated (or correlated) with Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Sprott Physical i.e., Sprott Physical and Wheaton Precious go up and down completely randomly.
Pair Corralation between Sprott Physical and Wheaton Precious
Assuming the 90 days trading horizon Sprott Physical is expected to generate 1.3 times less return on investment than Wheaton Precious. But when comparing it to its historical volatility, Sprott Physical Gold is 2.02 times less risky than Wheaton Precious. It trades about 0.1 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,280 in Wheaton Precious Metals on August 29, 2024 and sell it today you would earn a total of 3,377 from holding Wheaton Precious Metals or generate 63.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Physical Gold vs. Wheaton Precious Metals
Performance |
| Timeline |
| Sprott Physical Gold |
| Wheaton Precious Metals |
Sprott Physical and Wheaton Precious Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Physical and Wheaton Precious
The main advantage of trading using opposite Sprott Physical and Wheaton Precious positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical position performs unexpectedly, Wheaton Precious 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 Wheaton Precious will offset losses from the drop in Wheaton Precious' long position.| Sprott Physical vs. Microsoft Corp CDR | Sprott Physical vs. Apple Inc CDR | Sprott Physical vs. Alphabet Inc CDR | Sprott Physical vs. Amazon CDR |
| Wheaton Precious vs. Franco Nevada | Wheaton Precious vs. Pan American Silver | Wheaton Precious vs. Agnico Eagle Mines | Wheaton Precious vs. Sandstorm Gold Ltd |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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