Correlation Between Sandstorm Gold and Tanzanian Royalty

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

Diversification Opportunities for Sandstorm Gold and Tanzanian Royalty

0.67

Correlation Coefficient

Sandstorm Gold  Tanzanian Royalty

Poor diversification

The 3 months correlation between Sandstorm and Tanzanian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Tanzanian Royalty Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanzanian Royalty 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 Tanzanian Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanzanian Royalty has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Tanzanian Royalty go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Tanzanian Royalty

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to generate 0.95 times more return on investment than Tanzanian Royalty. However, Sandstorm Gold Ltd is 1.05 times less risky than Tanzanian Royalty. It trades about -0.03 of its potential returns per unit of risk. Tanzanian Royalty Exploration is currently generating about -0.06 per unit of risk. If you would invest  601.00  in Sandstorm Gold Ltd on September 12, 2024 and sell it today you would lose (35.00) from holding Sandstorm Gold Ltd or give up 5.82% of portfolio value over 90 days.

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

Sandstorm Gold Ltd  vs.  Tanzanian Royalty Exploration

Sandstorm Gold

Risk-Adjusted Performance

0 of 100

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.

Tanzanian Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanzanian Royalty Exploration 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sandstorm Gold and Tanzanian Royalty

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

The idea behind Sandstorm Gold Ltd and Tanzanian Royalty Exploration 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.