Correlation Between AngloGold Ashanti and Sandstorm Gold

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

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

Diversification Opportunities for AngloGold Ashanti and Sandstorm Gold

0.93

Correlation Coefficient

AngloGold Ashanti  Sandstorm Gold

Almost no diversification

The 3 months correlation between AngloGold and Sandstorm is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and AngloGold Ashanti 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 AngloGold Ashanti plc 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 AngloGold Ashanti i.e., AngloGold Ashanti and Sandstorm Gold go up and down completely randomly.

Pair Corralation between AngloGold Ashanti and Sandstorm Gold

Allowing for the 90-day total investment horizon AngloGold Ashanti plc is expected to generate 1.06 times more return on investment than Sandstorm Gold. However, AngloGold Ashanti is 1.06 times more volatile than Sandstorm Gold Ltd. It trades about 0.34 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  2,240  in AngloGold Ashanti plc on December 30, 2024 and sell it today you would earn a total of  1,458  from holding AngloGold Ashanti plc or generate 65.09% return on investment over 90 days.

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

AngloGold Ashanti plc  vs.  Sandstorm Gold Ltd

AngloGold Ashanti plc

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AngloGold Ashanti unveiled 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 17 (%) 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 AngloGold Ashanti and Sandstorm Gold

The main advantage of trading using opposite AngloGold Ashanti and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AngloGold Ashanti 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 AngloGold Ashanti plc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.