Correlation Between IShares Trust and Sprott Junior

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

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

Diversification Opportunities for IShares Trust and Sprott Junior

0.86

Correlation Coefficient

IShares Trust  Sprott Junior

Very poor diversification

The 3 months correlation between IShares and Sprott is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Sprott Junior Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Copper and IShares Trust 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 iShares Trust are associated (or correlated) with Sprott Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Copper has no effect on the direction of IShares Trust i.e., IShares Trust and Sprott Junior go up and down completely randomly.

Pair Corralation between IShares Trust and Sprott Junior

Given the investment horizon of 90 days IShares Trust is expected to generate 2.65 times less return on investment than Sprott Junior. But when comparing it to its historical volatility, iShares Trust is 2.2 times less risky than Sprott Junior. It trades about 0.02 of its potential returns per unit of risk. Sprott Junior Copper is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,184  in Sprott Junior Copper on August 25, 2024 and sell it today you would earn a total of  36.00  from holding Sprott Junior Copper or generate 1.65% return on investment over 90 days.

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

iShares Trust   vs.  Sprott Junior Copper

iShares Trust

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Trust is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

Sprott Junior Copper

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Copper are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Sprott Junior is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IShares Trust and Sprott Junior

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

The idea behind iShares Trust and Sprott Junior Copper 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 Transaction History module to view history of all your transactions and understand their impact on performance.