Correlation Between Sandstorm Gold and Pearson PLC

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

Diversification Opportunities for Sandstorm Gold and Pearson PLC

-0.57

Correlation Coefficient

Sandstorm Gold  Pearson PLC

Excellent diversification

The 3 months correlation between Sandstorm and Pearson is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR 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 Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Pearson PLC go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Pearson PLC

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to under-perform the Pearson PLC. In addition to that, Sandstorm Gold is 2.39 times more volatile than Pearson PLC ADR. It trades about -0.07 of its total potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.11 per unit of volatility. If you would invest  1,527  in Pearson PLC ADR on October 7, 2024 and sell it today you would earn a total of  70.00  from holding Pearson PLC ADR or generate 4.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sandstorm Gold Ltd  vs.  Pearson PLC ADR

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.

Pearson PLC ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pearson PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandstorm Gold and Pearson PLC

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

The idea behind Sandstorm Gold Ltd and Pearson PLC ADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.