Correlation Between Sprott Gold and Royce Small

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

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

Diversification Opportunities for Sprott Gold and Royce Small

-0.22

Correlation Coefficient

Sprott Gold  Royce Small

Very good diversification

The 3 months correlation between Sprott and Royce is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Royce Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Small Cap and Sprott Gold 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 Gold Equity are associated (or correlated) with Royce Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Small Cap has no effect on the direction of Sprott Gold i.e., Sprott Gold and Royce Small go up and down completely randomly.

Pair Corralation between Sprott Gold and Royce Small

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 1.77 times more return on investment than Royce Small. However, Sprott Gold is 1.77 times more volatile than Royce Small Cap Value. It trades about 0.12 of its potential returns per unit of risk. Royce Small Cap Value is currently generating about -0.13 per unit of risk. If you would invest  5,438  in Sprott Gold Equity on September 12, 2024 and sell it today you would earn a total of  221.00  from holding Sprott Gold Equity or generate 4.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sprott Gold Equity  vs.  Royce Small Cap Value

Sprott Gold Equity

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Sprott Gold is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Royce Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Small Cap Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Royce Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Gold and Royce Small

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

The idea behind Sprott Gold Equity and Royce Small Cap Value 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.