Correlation Between Sprott Physical and IGM Financial

Can any of the company-specific risk be diversified away by investing in both Sprott Physical and IGM Financial 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 IGM Financial 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 IGM Financial, you can compare the effects of market volatilities on Sprott Physical and IGM Financial 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 IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and IGM Financial.

Diversification Opportunities for Sprott Physical and IGM Financial

0.3

Correlation Coefficient

Sprott Physical  IGM Financial

Weak diversification

The 3 months correlation between Sprott and IGM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial 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 IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Sprott Physical i.e., Sprott Physical and IGM Financial go up and down completely randomly.

Pair Corralation between Sprott Physical and IGM Financial

Assuming the 90 days trading horizon Sprott Physical is expected to generate 3.44 times less return on investment than IGM Financial. But when comparing it to its historical volatility, Sprott Physical Gold is 1.03 times less risky than IGM Financial. It trades about 0.08 of its potential returns per unit of risk. IGM Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,971  in IGM Financial on September 21, 2024 and sell it today you would earn a total of  671.00  from holding IGM Financial or generate 16.9% return on investment over 90 days.

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

Sprott Physical Gold  vs.  IGM Financial

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.

IGM Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, IGM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Physical and IGM Financial

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

The idea behind Sprott Physical Gold and IGM Financial 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.