Correlation Between Sandstorm Gold and Arm Holdings

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

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

Diversification Opportunities for Sandstorm Gold and Arm Holdings

0.54

Correlation Coefficient

Sandstorm Gold  Arm Holdings

Very weak diversification

The 3 months correlation between Sandstorm and Arm is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Sandstorm 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 Sandstorm Gold Ltd are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Arm Holdings go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Arm Holdings

Given the investment horizon of 90 days Sandstorm Gold is expected to generate 14.61 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, Sandstorm Gold Ltd is 2.24 times less risky than Arm Holdings. It trades about 0.01 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,359  in Arm Holdings plc on October 3, 2024 and sell it today you would earn a total of  5,977  from holding Arm Holdings plc or generate 93.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.06%
Values	Daily Returns

Sandstorm Gold Ltd  vs.  Arm Holdings plc

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 rather sound basic indicators, Sandstorm Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arm Holdings plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arm Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sandstorm Gold and Arm Holdings

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

The idea behind Sandstorm Gold Ltd and Arm Holdings plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.