Correlation Between Analog Devices and Sandstorm Gold

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

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

Diversification Opportunities for Analog Devices and Sandstorm Gold

0.61

Correlation Coefficient

Analog Devices  Sandstorm Gold

Poor diversification

The 3 months correlation between Analog and Sandstorm is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Analog Devices 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 Analog Devices are associated (or correlated) with Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of Analog Devices i.e., Analog Devices and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Analog Devices and Sandstorm Gold

Considering the 90-day investment horizon Analog Devices is expected to generate 0.79 times more return on investment than Sandstorm Gold. However, Analog Devices is 1.26 times less risky than Sandstorm Gold. It trades about 0.04 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.01 per unit of risk. If you would invest  16,271  in Analog Devices on October 3, 2024 and sell it today you would earn a total of  4,985  from holding Analog Devices or generate 30.64% return on investment over 90 days.

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

Analog Devices  vs.  Sandstorm Gold Ltd

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Sandstorm Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandstorm Gold Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sandstorm Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Analog Devices and Sandstorm Gold

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

The idea behind Analog Devices and Sandstorm Gold Ltd 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.