Correlation Between Sprott Physical and Helios Fairfax

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

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

Diversification Opportunities for Sprott Physical and Helios Fairfax

0.7

Correlation Coefficient

Sprott Physical  Helios Fairfax

Poor diversification

The 3 months correlation between Sprott and Helios is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Helios Fairfax Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Fairfax Partners 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 Gold are associated (or correlated) with Helios Fairfax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Fairfax Partners has no effect on the direction of Sprott Physical i.e., Sprott Physical and Helios Fairfax go up and down completely randomly.

Pair Corralation between Sprott Physical and Helios Fairfax

Assuming the 90 days trading horizon Sprott Physical is expected to generate 1.71 times less return on investment than Helios Fairfax. But when comparing it to its historical volatility, Sprott Physical Gold is 2.27 times less risky than Helios Fairfax. It trades about 0.13 of its potential returns per unit of risk. Helios Fairfax Partners is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Helios Fairfax Partners on August 31, 2024 and sell it today you would earn a total of  40.00  from holding Helios Fairfax Partners or generate 16.0% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Helios Fairfax Partners

Sprott Physical Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Helios Fairfax Partners

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helios Fairfax Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Helios Fairfax sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Physical and Helios Fairfax

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

The idea behind Sprott Physical Gold and Helios Fairfax Partners 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.