Correlation Between Sprott Physical and First Capital

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

Diversification Opportunities for Sprott Physical and First Capital

0.78

Correlation Coefficient

Sprott Physical  First Capital

Poor diversification

The 3 months correlation between Sprott and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and First Capital Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital Real 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital Real has no effect on the direction of Sprott Physical i.e., Sprott Physical and First Capital go up and down completely randomly.

Pair Corralation between Sprott Physical and First Capital

Assuming the 90 days trading horizon Sprott Physical is expected to generate 1.51 times less return on investment than First Capital. In addition to that, Sprott Physical is 1.08 times more volatile than First Capital Real. It trades about 0.09 of its total potential returns per unit of risk. First Capital Real is currently generating about 0.15 per unit of volatility. If you would invest  1,721  in First Capital Real on May 2, 2025 and sell it today you would earn a total of  167.00  from holding First Capital Real or generate 9.7% 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.  First Capital Real

Sprott Physical Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in August 2025.

First Capital Real

Risk-Adjusted Performance

Good

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

Pair Trading with Sprott Physical and First Capital

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

The idea behind Sprott Physical Gold and First Capital Real 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.