Correlation Between Global X and Sprott Gold

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

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

Diversification Opportunities for Global X and Sprott Gold

0.98

Correlation Coefficient

Global X  Sprott Gold

Almost no diversification

The 3 months correlation between Global and Sprott is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Global X Silver and Sprott Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Gold Miners and Global X 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 Global X Silver 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 Miners has no effect on the direction of Global X i.e., Global X and Sprott Gold go up and down completely randomly.

Pair Corralation between Global X and Sprott Gold

Considering the 90-day investment horizon Global X Silver is expected to generate 1.25 times more return on investment than Sprott Gold. However, Global X is 1.25 times more volatile than Sprott Gold Miners. It trades about 0.27 of its potential returns per unit of risk. Sprott Gold Miners is currently generating about 0.18 per unit of risk. If you would invest  2,445  in Global X Silver on March 5, 2024 and sell it today you would earn a total of  1,024  from holding Global X Silver or generate 41.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Global X Silver  vs.  Sprott Gold Miners

Global X Silver

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Silver are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish forward indicators, Global X disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Gold Miners

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Miners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish fundamental indicators, Sprott Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Sprott Gold

The main advantage of trading using opposite Global X and Sprott Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Silver and Sprott Gold Miners 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.