Correlation Between Sprott Gold and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Sprott Gold and Precious Metals 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 Gold and Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Gold Equity and Precious Metals Fund, you can compare the effects of market volatilities on Sprott Gold and Precious Metals 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 Gold with a short position of Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Gold and Precious Metals.
Diversification Opportunities for Sprott Gold and Precious Metals
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sprott and PRECIOUS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Precious Metals Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals and Sprott Gold 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 Gold Equity are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals has no effect on the direction of Sprott Gold i.e., Sprott Gold and Precious Metals go up and down completely randomly.
Pair Corralation between Sprott Gold and Precious Metals
Assuming the 90 days horizon Sprott Gold Equity is expected to generate 0.84 times more return on investment than Precious Metals. However, Sprott Gold Equity is 1.19 times less risky than Precious Metals. It trades about 0.04 of its potential returns per unit of risk. Precious Metals Fund is currently generating about 0.03 per unit of risk. If you would invest 4,176 in Sprott Gold Equity on November 1, 2024 and sell it today you would earn a total of 1,387 from holding Sprott Gold Equity or generate 33.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Gold Equity vs. Precious Metals Fund
Performance |
| Timeline |
| Sprott Gold Equity |
| Precious Metals |
Sprott Gold and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Gold and Precious Metals
The main advantage of trading using opposite Sprott Gold and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Gold position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.| Sprott Gold vs. Sprott Junior Gold | Sprott Gold vs. Sprott Gold Miners | Sprott Gold vs. Europac Gold Fund | Sprott Gold vs. US Global GO |
| Precious Metals vs. Energy Fund Investor | Precious Metals vs. Energy Services Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Health Care Fund |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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