Correlation Between Materials Select and Sprott Copper
Can any of the company-specific risk be diversified away by investing in both Materials Select and Sprott Copper 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 Materials Select and Sprott Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and Sprott Copper Miners, you can compare the effects of market volatilities on Materials Select and Sprott Copper 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 Materials Select with a short position of Sprott Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and Sprott Copper.
Diversification Opportunities for Materials Select and Sprott Copper
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Materials and Sprott is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Sprott Copper Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Copper Miners and Materials Select 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 Materials Select Sector are associated (or correlated) with Sprott Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Copper Miners has no effect on the direction of Materials Select i.e., Materials Select and Sprott Copper go up and down completely randomly.
Pair Corralation between Materials Select and Sprott Copper
Considering the 90-day investment horizon Materials Select Sector is expected to generate 0.4 times more return on investment than Sprott Copper. However, Materials Select Sector is 2.49 times less risky than Sprott Copper. It trades about 0.09 of its potential returns per unit of risk. Sprott Copper Miners is currently generating about -0.05 per unit of risk. If you would invest 9,339 in Materials Select Sector on September 1, 2024 and sell it today you would earn a total of 139.00 from holding Materials Select Sector or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Materials Select Sector vs. Sprott Copper Miners
Performance |
| Timeline |
| Materials Select Sector |
| Sprott Copper Miners |
Materials Select and Sprott Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and Sprott Copper
The main advantage of trading using opposite Materials Select and Sprott Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select position performs unexpectedly, Sprott Copper 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 Copper will offset losses from the drop in Sprott Copper's long position.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
| Sprott Copper vs. First Trust Exchange Traded | Sprott Copper vs. Ultimus Managers Trust | Sprott Copper vs. Horizon Kinetics Medical | Sprott Copper vs. Harbor Health Care |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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