Correlation Between Brompton European and Sprott Physical

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

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

Diversification Opportunities for Brompton European and Sprott Physical

0.53

Correlation Coefficient

Brompton European  Sprott Physical

Very weak diversification

The 3 months correlation between Brompton and Sprott is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Sprott Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Silver and Brompton European 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 Brompton European Dividend 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 Silver has no effect on the direction of Brompton European i.e., Brompton European and Sprott Physical go up and down completely randomly.

Pair Corralation between Brompton European and Sprott Physical

Assuming the 90 days trading horizon Brompton European is expected to generate 29.05 times less return on investment than Sprott Physical. But when comparing it to its historical volatility, Brompton European Dividend is 1.48 times less risky than Sprott Physical. It trades about 0.01 of its potential returns per unit of risk. Sprott Physical Silver is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Sprott Physical Silver on August 31, 2024 and sell it today you would earn a total of  147.00  from holding Sprott Physical Silver or generate 11.38% return on investment over 90 days.

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

Brompton European Dividend  vs.  Sprott Physical Silver

Brompton European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton European Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sprott Physical Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Silver are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Brompton European and Sprott Physical

The main advantage of trading using opposite Brompton European and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European 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 Brompton European Dividend and Sprott Physical Silver 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.