Correlation Between Sprott Physical and Sprott Lithium
Can any of the company-specific risk be diversified away by investing in both Sprott Physical and Sprott Lithium 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 Sprott Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Physical Uranium and Sprott Lithium Miners, you can compare the effects of market volatilities on Sprott Physical and Sprott Lithium 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 Sprott Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and Sprott Lithium.
Diversification Opportunities for Sprott Physical and Sprott Lithium
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sprott and Sprott is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Uranium and Sprott Lithium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Lithium Miners 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 Uranium are associated (or correlated) with Sprott Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Lithium Miners has no effect on the direction of Sprott Physical i.e., Sprott Physical and Sprott Lithium go up and down completely randomly.
Pair Corralation between Sprott Physical and Sprott Lithium
Assuming the 90 days trading horizon Sprott Physical Uranium is expected to generate 0.85 times more return on investment than Sprott Lithium. However, Sprott Physical Uranium is 1.18 times less risky than Sprott Lithium. It trades about 0.05 of its potential returns per unit of risk. Sprott Lithium Miners is currently generating about -0.05 per unit of risk. If you would invest 1,568 in Sprott Physical Uranium on November 1, 2024 and sell it today you would earn a total of 802.00 from holding Sprott Physical Uranium or generate 51.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Sprott Physical Uranium vs. Sprott Lithium Miners
Performance |
| Timeline |
| Sprott Physical Uranium |
| Sprott Lithium Miners |
Sprott Physical and Sprott Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Physical and Sprott Lithium
The main advantage of trading using opposite Sprott Physical and Sprott Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical position performs unexpectedly, Sprott Lithium 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 Lithium will offset losses from the drop in Sprott Lithium's long position.| Sprott Physical vs. Global Atomic Corp | Sprott Physical vs. enCore Energy Corp | Sprott Physical vs. NexGen Energy | Sprott Physical vs. Sprott Physical Uranium |
| Sprott Lithium vs. Sprott Energy Transition | Sprott Lithium vs. Sprott Junior Copper | Sprott Lithium vs. Sprott Junior Uranium | Sprott Lithium 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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