Correlation Between Sprott and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sprott and Dow Jones 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 and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Inc and Dow Jones Industrial, you can compare the effects of market volatilities on Sprott and Dow Jones 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 with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott and Dow Jones.
Diversification Opportunities for Sprott and Dow Jones
Very weak diversification
The 3 months correlation between Sprott and Dow is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Inc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Sprott 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 Inc are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Sprott i.e., Sprott and Dow Jones go up and down completely randomly.
Pair Corralation between Sprott and Dow Jones
Considering the 90-day investment horizon Sprott Inc is expected to generate 2.52 times more return on investment than Dow Jones. However, Sprott is 2.52 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 3,214 in Sprott Inc on August 27, 2024 and sell it today you would earn a total of 1,228 from holding Sprott Inc or generate 38.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Inc vs. Dow Jones Industrial
Performance |
| Timeline |
Sprott and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sprott Inc
Pair trading matchups for Sprott
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sprott and Dow Jones
The main advantage of trading using opposite Sprott and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Sprott vs. Invesco Quality Municipal | Sprott vs. Invesco Municipal Income | Sprott vs. DWS Municipal Income | Sprott vs. Eaton Vance Municipal |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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