Correlation Between Brookfield and Sprott Physical

Can any of the company-specific risk be diversified away by investing in both Brookfield and Sprott Physical 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 Brookfield and Sprott Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brookfield and Sprott Physical Gold, you can compare the effects of market volatilities on Brookfield and Sprott Physical 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 Brookfield with a short position of Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield and Sprott Physical.

Diversification Opportunities for Brookfield and Sprott Physical

0.25

Correlation Coefficient

Brookfield  Sprott Physical

Modest diversification

The 3 months correlation between Brookfield and Sprott is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold and Brookfield 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 Brookfield are associated (or correlated) with Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of Brookfield i.e., Brookfield and Sprott Physical go up and down completely randomly.

Pair Corralation between Brookfield and Sprott Physical

Assuming the 90 days horizon Brookfield is expected to generate 1.5 times more return on investment than Sprott Physical. However, Brookfield is 1.5 times more volatile than Sprott Physical Gold. It trades about 0.17 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.07 per unit of risk. If you would invest  7,047  in Brookfield on September 25, 2024 and sell it today you would earn a total of  1,151  from holding Brookfield or generate 16.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brookfield  vs.  Sprott Physical Gold

Brookfield

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield displayed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Physical Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sprott Physical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brookfield and Sprott Physical

The main advantage of trading using opposite Brookfield and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield position performs unexpectedly, Sprott Physical 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 Physical will offset losses from the drop in Sprott Physical's long position.

The idea behind Brookfield and Sprott Physical Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..