Correlation Between Sprott Physical and Constellation Software

Can any of the company-specific risk be diversified away by investing in both Sprott Physical and Constellation Software 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 Constellation Software 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 Constellation Software, you can compare the effects of market volatilities on Sprott Physical and Constellation Software 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 Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Physical and Constellation Software.

Diversification Opportunities for Sprott Physical and Constellation Software

-0.29

Correlation Coefficient

Sprott Physical  Constellation Software

Very good diversification

The 3 months correlation between Sprott and Constellation is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Sprott Physical i.e., Sprott Physical and Constellation Software go up and down completely randomly.

Pair Corralation between Sprott Physical and Constellation Software

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 0.9 times more return on investment than Constellation Software. However, Sprott Physical Gold is 1.11 times less risky than Constellation Software. It trades about 0.11 of its potential returns per unit of risk. Constellation Software is currently generating about -0.15 per unit of risk. If you would invest  2,812  in Sprott Physical Gold on May 18, 2025 and sell it today you would earn a total of  251.00  from holding Sprott Physical Gold or generate 8.93% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Constellation Software

Sprott Physical Gold

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Constellation Software

Risk-Adjusted Performance

Weakest

Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in September 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sprott Physical and Constellation Software

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

The idea behind Sprott Physical Gold and Constellation Software 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.