Correlation Between Sprott Junior and Sprott Gold

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

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

Diversification Opportunities for Sprott Junior and Sprott Gold

0.95

Correlation Coefficient

Sprott Junior  Sprott Gold

Almost no diversification

The 3 months correlation between Sprott and Sprott is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Junior Gold and Sprott Gold Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Gold Equity and Sprott Junior 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 Junior Gold are associated (or correlated) with Sprott Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Gold Equity has no effect on the direction of Sprott Junior i.e., Sprott Junior and Sprott Gold go up and down completely randomly.

Pair Corralation between Sprott Junior and Sprott Gold

Given the investment horizon of 90 days Sprott Junior Gold is expected to generate 1.17 times more return on investment than Sprott Gold. However, Sprott Junior is 1.17 times more volatile than Sprott Gold Equity. It trades about 0.11 of its potential returns per unit of risk. Sprott Gold Equity is currently generating about 0.07 per unit of risk. If you would invest  3,324  in Sprott Junior Gold on September 3, 2024 and sell it today you would earn a total of  432.00  from holding Sprott Junior Gold or generate 13.0% return on investment over 90 days.

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

Sprott Junior Gold  vs.  Sprott Gold Equity

Sprott Junior Gold

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Sprott Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Gold Equity

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly sluggish essential indicators, Sprott Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Junior and Sprott Gold

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

The idea behind Sprott Junior Gold and Sprott Gold Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.