Correlation Between Delek Drilling and Sandstorm Gold

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

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

Diversification Opportunities for Delek Drilling and Sandstorm Gold

-0.65

Correlation Coefficient

Delek Drilling  Sandstorm Gold

Excellent diversification

The 3 months correlation between Delek and Sandstorm is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Delek Drilling 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 Delek Drilling 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 Delek Drilling i.e., Delek Drilling and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Delek Drilling and Sandstorm Gold

Assuming the 90 days horizon Delek Drilling is expected to generate 0.98 times more return on investment than Sandstorm Gold. However, Delek Drilling is 1.02 times less risky than Sandstorm Gold. It trades about 0.13 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about -0.13 per unit of risk. If you would invest  311.00  in Delek Drilling on September 30, 2024 and sell it today you would earn a total of  16.00  from holding Delek Drilling or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Delek Drilling   vs.  Sandstorm Gold Ltd

Delek Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Delek Drilling and Sandstorm Gold

The main advantage of trading using opposite Delek Drilling and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Drilling 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 Delek Drilling 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.