Correlation Between Sprott Physical and Power

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

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

Diversification Opportunities for Sprott Physical and Power

0.7

Correlation Coefficient

Sprott Physical  Power

Poor diversification

The 3 months correlation between Sprott and Power is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power and Sprott Physical 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 Physical Gold are associated (or correlated) with Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power has no effect on the direction of Sprott Physical i.e., Sprott Physical and Power go up and down completely randomly.

Pair Corralation between Sprott Physical and Power

Assuming the 90 days trading horizon Sprott Physical is expected to generate 3.85 times less return on investment than Power. In addition to that, Sprott Physical is 1.0 times more volatile than Power. It trades about 0.04 of its total potential returns per unit of risk. Power is currently generating about 0.14 per unit of volatility. If you would invest  4,916  in Power on April 21, 2025 and sell it today you would earn a total of  514.00  from holding Power or generate 10.46% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Power

Sprott Physical Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Sprott Physical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Power may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Sprott Physical and Power

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

The idea behind Sprott Physical Gold and Power 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.