Correlation Between Premium Income and Sprott Physical

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

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

Diversification Opportunities for Premium Income and Sprott Physical

0.33

Correlation Coefficient

Premium Income  Sprott Physical

Weak diversification

The 3 months correlation between Premium and Sprott is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income 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 Premium Income 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 Premium Income 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 Premium Income i.e., Premium Income and Sprott Physical go up and down completely randomly.

Pair Corralation between Premium Income and Sprott Physical

Assuming the 90 days trading horizon Premium Income is expected to generate 1.34 times more return on investment than Sprott Physical. However, Premium Income is 1.34 times more volatile than Sprott Physical Gold. It trades about 0.09 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.09 per unit of risk. If you would invest  579.00  in Premium Income on September 12, 2024 and sell it today you would earn a total of  57.00  from holding Premium Income or generate 9.84% return on investment over 90 days.

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

Premium Income  vs.  Sprott Physical Gold

Premium Income

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premium Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sprott Physical Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Premium Income and Sprott Physical

The main advantage of trading using opposite Premium Income and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Income 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 Premium Income 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.