Correlation Between Sandstorm Gold and Royal Gold

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

Diversification Opportunities for Sandstorm Gold and Royal Gold

0.59

Correlation Coefficient

Sandstorm Gold  Royal Gold

Very weak diversification

The 3 months correlation between Sandstorm and Royal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Royal Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Gold 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 Royal Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Gold has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Royal Gold go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Royal Gold

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to generate 1.23 times more return on investment than Royal Gold. However, Sandstorm Gold is 1.23 times more volatile than Royal Gold. It trades about 0.06 of its potential returns per unit of risk. Royal Gold is currently generating about 0.04 per unit of risk. If you would invest  578.00  in Sandstorm Gold Ltd on November 28, 2024 and sell it today you would earn a total of  39.00  from holding Sandstorm Gold Ltd or generate 6.75% return on investment over 90 days.

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

Sandstorm Gold Ltd  vs.  Royal Gold

Sandstorm Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Sandstorm Gold may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Royal Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Royal Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sandstorm Gold and Royal Gold

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

The idea behind Sandstorm Gold Ltd and Royal Gold 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.