Correlation Between Sprott Physical and Sandstorm Gold

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

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

Diversification Opportunities for Sprott Physical and Sandstorm Gold

0.7

Correlation Coefficient

Sprott Physical  Sandstorm Gold

Poor diversification

The 3 months correlation between Sprott and Sandstorm is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical 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 Sprott Physical 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 Physical 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 Sprott Physical i.e., Sprott Physical and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Sprott Physical and Sandstorm Gold

Assuming the 90 days trading horizon Sprott Physical Gold is expected to generate 0.55 times more return on investment than Sandstorm Gold. However, Sprott Physical Gold is 1.81 times less risky than Sandstorm Gold. It trades about 0.14 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.06 per unit of risk. If you would invest  3,099  in Sprott Physical Gold on September 3, 2024 and sell it today you would earn a total of  333.00  from holding Sprott Physical Gold or generate 10.75% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Sandstorm Gold Ltd

Sprott Physical Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sandstorm Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, Sandstorm Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sprott Physical and Sandstorm Gold

The main advantage of trading using opposite Sprott Physical and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical 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 Sprott Physical 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.