Correlation Between Sandstorm Gold and United States

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

Diversification Opportunities for Sandstorm Gold and United States

0.4

Correlation Coefficient

Sandstorm Gold  United States

Very weak diversification

The 3 months correlation between Sandstorm and United is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and United States go up and down completely randomly.

Pair Corralation between Sandstorm Gold and United States

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to generate 0.6 times more return on investment than United States. However, Sandstorm Gold Ltd is 1.67 times less risky than United States. It trades about -0.19 of its potential returns per unit of risk. United States Steel is currently generating about -0.36 per unit of risk. If you would invest  585.00  in Sandstorm Gold Ltd on September 23, 2024 and sell it today you would lose (46.00) from holding Sandstorm Gold Ltd or give up 7.86% of portfolio value over 90 days.

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

Sandstorm Gold Ltd  vs.  United States Steel

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 abnormal 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.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sandstorm Gold and United States

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

The idea behind Sandstorm Gold Ltd and United States Steel 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.