Correlation Between Sprott Junior and Materials Select
Can any of the company-specific risk be diversified away by investing in both Sprott Junior and Materials Select 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 Junior and Materials Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Junior Uranium and Materials Select Sector, you can compare the effects of market volatilities on Sprott Junior and Materials Select 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 Junior with a short position of Materials Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Junior and Materials Select.
Diversification Opportunities for Sprott Junior and Materials Select
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sprott and Materials is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Uranium and Materials Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Select Sector and Sprott Junior 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 Junior Uranium are associated (or correlated) with Materials Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Select Sector has no effect on the direction of Sprott Junior i.e., Sprott Junior and Materials Select go up and down completely randomly.
Pair Corralation between Sprott Junior and Materials Select
Given the investment horizon of 90 days Sprott Junior is expected to generate 1.22 times less return on investment than Materials Select. In addition to that, Sprott Junior is 3.75 times more volatile than Materials Select Sector. It trades about 0.02 of its total potential returns per unit of risk. Materials Select Sector is currently generating about 0.08 per unit of volatility. If you would invest 7,959 in Materials Select Sector on August 24, 2024 and sell it today you would earn a total of 1,398 from holding Materials Select Sector or generate 17.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprott Junior Uranium vs. Materials Select Sector
Performance |
| Timeline |
| Sprott Junior Uranium |
| Materials Select Sector |
Sprott Junior and Materials Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Junior and Materials Select
The main advantage of trading using opposite Sprott Junior and Materials Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Junior position performs unexpectedly, Materials Select 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 Materials Select will offset losses from the drop in Materials Select's long position.| Sprott Junior vs. Sprott Junior Copper | Sprott Junior vs. Sprott Energy Transition | Sprott Junior vs. Sprott Lithium Miners | Sprott Junior vs. Sprott Uranium Miners |
| Materials Select vs. Sprott Junior Copper | Materials Select vs. Sprott Junior Uranium | Materials Select vs. Sprott Nickel Miners | Materials Select vs. Sprott Uranium 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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