Correlation Between Agnico Eagle and Sandstorm Gold

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

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

Diversification Opportunities for Agnico Eagle and Sandstorm Gold

0.35

Correlation Coefficient

Agnico Eagle  Sandstorm Gold

Weak diversification

The 3 months correlation between Agnico and Sandstorm is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Agnico Eagle 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 Agnico Eagle Mines 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 Agnico Eagle i.e., Agnico Eagle and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Agnico Eagle and Sandstorm Gold

Considering the 90-day investment horizon Agnico Eagle Mines is expected to generate 0.8 times more return on investment than Sandstorm Gold. However, Agnico Eagle Mines is 1.25 times less risky than Sandstorm Gold. It trades about 0.3 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.23 per unit of risk. If you would invest  7,752  in Agnico Eagle Mines on December 29, 2024 and sell it today you would earn a total of  2,984  from holding Agnico Eagle Mines or generate 38.49% return on investment over 90 days.

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

Agnico Eagle Mines  vs.  Sandstorm Gold Ltd

Agnico Eagle Mines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Sandstorm Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Sandstorm Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agnico Eagle and Sandstorm Gold

The main advantage of trading using opposite Agnico Eagle and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agnico Eagle 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 Agnico Eagle Mines 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.