Correlation Between Materials Select and Sprott Energy
Can any of the company-specific risk be diversified away by investing in both Materials Select and Sprott Energy 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 Energy 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 Energy Transition, you can compare the effects of market volatilities on Materials Select and Sprott Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and Sprott Energy.
Diversification Opportunities for Materials Select and Sprott Energy
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Materials and Sprott is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Sprott Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Energy Transition 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Energy Transition has no effect on the direction of Materials Select i.e., Materials Select and Sprott Energy go up and down completely randomly.
Pair Corralation between Materials Select and Sprott Energy
Considering the 90-day investment horizon Materials Select Sector is expected to generate 0.47 times more return on investment than Sprott Energy. However, Materials Select Sector is 2.12 times less risky than Sprott Energy. It trades about -0.12 of its potential returns per unit of risk. Sprott Energy Transition is currently generating about -0.07 per unit of risk. If you would invest 9,573 in Materials Select Sector on August 24, 2024 and sell it today you would lose (216.00) from holding Materials Select Sector or give up 2.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Select Sector vs. Sprott Energy Transition
Performance |
| Timeline |
| Materials Select Sector |
| Sprott Energy Transition |
Materials Select and Sprott Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and Sprott Energy
The main advantage of trading using opposite Materials Select and Sprott Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select position performs unexpectedly, Sprott Energy 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 Energy will offset losses from the drop in Sprott Energy's long position.| Materials Select vs. Sprott Junior Copper | Materials Select vs. Sprott Junior Uranium | Materials Select vs. Sprott Nickel Miners | Materials Select vs. Sprott Uranium Miners |
| Sprott Energy vs. Sprott Junior Copper | Sprott Energy vs. Sprott Junior Uranium | Sprott Energy vs. Sprott Nickel Miners | Sprott Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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