Correlation Between Seabridge Gold and Gold Royalty

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

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

Diversification Opportunities for Seabridge Gold and Gold Royalty

0.86

Correlation Coefficient

Seabridge Gold  Gold Royalty

Very poor diversification

The 3 months correlation between Seabridge and Gold is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Seabridge Gold and Gold Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Royalty Corp and Seabridge 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 Seabridge Gold are associated (or correlated) with Gold Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Royalty Corp has no effect on the direction of Seabridge Gold i.e., Seabridge Gold and Gold Royalty go up and down completely randomly.

Pair Corralation between Seabridge Gold and Gold Royalty

Allowing for the 90-day total investment horizon Seabridge Gold is expected to under-perform the Gold Royalty. In addition to that, Seabridge Gold is 1.23 times more volatile than Gold Royalty Corp. It trades about -0.17 of its total potential returns per unit of risk. Gold Royalty Corp is currently generating about -0.09 per unit of volatility. If you would invest  141.00  in Gold Royalty Corp on September 16, 2024 and sell it today you would lose (16.00) from holding Gold Royalty Corp or give up 11.35% of portfolio value over 90 days.

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

Seabridge Gold  vs.  Gold Royalty Corp

Seabridge Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seabridge Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gold Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gold Royalty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seabridge Gold and Gold Royalty

The main advantage of trading using opposite Seabridge Gold and Gold Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seabridge Gold position performs unexpectedly, Gold Royalty 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 Gold Royalty will offset losses from the drop in Gold Royalty's long position.

The idea behind Seabridge Gold and Gold Royalty Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.