Correlation Between Cabral Gold and Sandstorm Gold

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

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

Diversification Opportunities for Cabral Gold and Sandstorm Gold

0.89

Correlation Coefficient

Cabral Gold  Sandstorm Gold

Very poor diversification

The 3 months correlation between Cabral and Sandstorm is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cabral Gold and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Cabral 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 Cabral Gold 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 Cabral Gold i.e., Cabral Gold and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Cabral Gold and Sandstorm Gold

Assuming the 90 days horizon Cabral Gold is expected to generate 2.94 times more return on investment than Sandstorm Gold. However, Cabral Gold is 2.94 times more volatile than Sandstorm Gold Ltd. It trades about 0.16 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  15.00  in Cabral Gold on December 30, 2024 and sell it today you would earn a total of  11.00  from holding Cabral Gold or generate 73.33% return on investment over 90 days.

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

Cabral Gold  vs.  Sandstorm Gold Ltd

Cabral Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cabral Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cabral Gold reported 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 Cabral Gold and Sandstorm Gold

The main advantage of trading using opposite Cabral Gold and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabral Gold 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 Cabral Gold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.