Correlation Between Sandstorm Gold and Canopy Growth

Can any of the company-specific risk be diversified away by investing in both Sandstorm Gold and Canopy Growth 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 Canopy Growth 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 Canopy Growth Corp, you can compare the effects of market volatilities on Sandstorm Gold and Canopy Growth 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 Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandstorm Gold and Canopy Growth.

Diversification Opportunities for Sandstorm Gold and Canopy Growth

0.8

Correlation Coefficient

Sandstorm Gold  Canopy Growth

Very poor diversification

The 3 months correlation between Sandstorm and Canopy is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Canopy Growth go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Canopy Growth

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to generate 0.43 times more return on investment than Canopy Growth. However, Sandstorm Gold Ltd is 2.32 times less risky than Canopy Growth. It trades about -0.09 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.12 per unit of risk. If you would invest  622.00  in Sandstorm Gold Ltd on September 22, 2024 and sell it today you would lose (83.00) from holding Sandstorm Gold Ltd or give up 13.34% of portfolio value over 90 days.

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

Sandstorm Gold Ltd  vs.  Canopy Growth Corp

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 unfluctuating 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.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sandstorm Gold and Canopy Growth

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

The idea behind Sandstorm Gold Ltd and Canopy Growth 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.