Correlation Between Sprott Gold and Japanese Small

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

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

Diversification Opportunities for Sprott Gold and Japanese Small

0.71

Correlation Coefficient

Sprott Gold  Japanese Small

Poor diversification

The 3 months correlation between Sprott and Japanese is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Japanese Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japanese Small Pany and Sprott Gold 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 Gold Equity are associated (or correlated) with Japanese Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japanese Small Pany has no effect on the direction of Sprott Gold i.e., Sprott Gold and Japanese Small go up and down completely randomly.

Pair Corralation between Sprott Gold and Japanese Small

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 1.84 times more return on investment than Japanese Small. However, Sprott Gold is 1.84 times more volatile than Japanese Small Pany. It trades about 0.14 of its potential returns per unit of risk. Japanese Small Pany is currently generating about 0.25 per unit of risk. If you would invest  7,311  in Sprott Gold Equity on May 21, 2025 and sell it today you would earn a total of  1,000.00  from holding Sprott Gold Equity or generate 13.68% return on investment over 90 days.

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

Sprott Gold Equity  vs.  Japanese Small Pany

Sprott Gold Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly sluggish essential indicators, Sprott Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Japanese Small Pany

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Japanese Small Pany are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Japanese Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Gold and Japanese Small

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

The idea behind Sprott Gold Equity and Japanese Small Pany 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.