Correlation Between Sprott Gold and Government Securities
Can any of the company-specific risk be diversified away by investing in both Sprott Gold and Government Securities 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 Government Securities 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 Government Securities Fund, you can compare the effects of market volatilities on Sprott Gold and Government Securities 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 Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Gold and Government Securities.
Diversification Opportunities for Sprott Gold and Government Securities
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sprott and Government is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Sprott Gold i.e., Sprott Gold and Government Securities go up and down completely randomly.
Pair Corralation between Sprott Gold and Government Securities
Assuming the 90 days horizon Sprott Gold Equity is expected to generate 7.69 times more return on investment than Government Securities. However, Sprott Gold is 7.69 times more volatile than Government Securities Fund. It trades about 0.23 of its potential returns per unit of risk. Government Securities Fund is currently generating about 0.2 per unit of risk. If you would invest 5,348 in Sprott Gold Equity on September 13, 2024 and sell it today you would earn a total of 433.00 from holding Sprott Gold Equity or generate 8.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Gold Equity vs. Government Securities Fund
Performance |
| Timeline |
| Sprott Gold Equity |
| Government Securities |
Sprott Gold and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Gold and Government Securities
The main advantage of trading using opposite Sprott Gold and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Gold position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' 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 |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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