Correlation Between Schwab Small and Sprott Gold

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

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

Diversification Opportunities for Schwab Small and Sprott Gold

-0.26

Correlation Coefficient

Schwab Small  Sprott Gold

Very good diversification

The 3 months correlation between Schwab and Sprott is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Equity 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 Schwab Small 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 Schwab Small Cap Equity 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 Schwab Small i.e., Schwab Small and Sprott Gold go up and down completely randomly.

Pair Corralation between Schwab Small and Sprott Gold

Assuming the 90 days horizon Schwab Small Cap Equity is expected to generate 0.75 times more return on investment than Sprott Gold. However, Schwab Small Cap Equity is 1.34 times less risky than Sprott Gold. It trades about 0.13 of its potential returns per unit of risk. Sprott Gold Equity is currently generating about 0.03 per unit of risk. If you would invest  2,135  in Schwab Small Cap Equity on September 12, 2024 and sell it today you would earn a total of  217.00  from holding Schwab Small Cap Equity or generate 10.16% return on investment over 90 days.

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

Schwab Small Cap Equity  vs.  Sprott Gold Equity

Schwab Small Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Schwab Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Schwab Small and Sprott Gold

The main advantage of trading using opposite Schwab Small and Sprott Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Small 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 Schwab Small Cap Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..