Correlation Between Sandstorm Gold and SUMITOMO

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

Diversification Opportunities for Sandstorm Gold and SUMITOMO

0.43

Correlation Coefficient

Sandstorm Gold  SUMITOMO

Very weak diversification

The 3 months correlation between Sandstorm and SUMITOMO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and SUMITOMO MITSUI FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO MITSUI FINANCIAL 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 SUMITOMO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO MITSUI FINANCIAL has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and SUMITOMO go up and down completely randomly.

Pair Corralation between Sandstorm Gold and SUMITOMO

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to generate 4.54 times more return on investment than SUMITOMO. However, Sandstorm Gold is 4.54 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about 0.08 of its potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about -0.03 per unit of risk. If you would invest  561.00  in Sandstorm Gold Ltd on December 2, 2024 and sell it today you would earn a total of  52.00  from holding Sandstorm Gold Ltd or generate 9.27% 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.  SUMITOMO MITSUI FINANCIAL

Sandstorm Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 6 (%) 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 April 2025.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUMITOMO MITSUI FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SUMITOMO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sandstorm Gold and SUMITOMO

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

The idea behind Sandstorm Gold Ltd and SUMITOMO MITSUI FINANCIAL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.