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 Silver 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

0.71

Correlation Coefficient

Sprott Physical  Sandstorm Gold

Poor diversification

The 3 months correlation between Sprott and Sandstorm is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Silver 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 Silver 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 is expected to generate 2.17 times less return on investment than Sandstorm Gold. But when comparing it to its historical volatility, Sprott Physical Silver is 1.66 times less risky than Sandstorm Gold. It trades about 0.08 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  788.00  in Sandstorm Gold Ltd on December 1, 2024 and sell it today you would earn a total of  98.00  from holding Sandstorm Gold Ltd or generate 12.44% return on investment over 90 days.

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

Sprott Physical Silver  vs.  Sandstorm Gold Ltd

Sprott Physical Silver

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Silver are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sprott Physical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sandstorm Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Sandstorm Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Silver 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.