Correlation Between Torex Gold and Sandstorm Gold

Can any of the company-specific risk be diversified away by investing in both Torex Gold and Sandstorm 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 Torex Gold and Sandstorm Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Torex Gold Resources and Sandstorm Gold Ltd, you can compare the effects of market volatilities on Torex Gold and Sandstorm 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 Torex Gold with a short position of Sandstorm Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torex Gold and Sandstorm Gold.

Diversification Opportunities for Torex Gold and Sandstorm Gold

0.12

Correlation Coefficient

Torex Gold  Sandstorm Gold

Average diversification

The 3 months correlation between Torex and Sandstorm is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Torex Gold Resources and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Torex 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 Torex Gold Resources are associated (or correlated) with Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of Torex Gold i.e., Torex Gold and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Torex Gold and Sandstorm Gold

Assuming the 90 days horizon Torex Gold Resources is expected to generate 1.5 times more return on investment than Sandstorm Gold. However, Torex Gold is 1.5 times more volatile than Sandstorm Gold Ltd. It trades about 0.02 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about -0.06 per unit of risk. If you would invest  1,907  in Torex Gold Resources on September 15, 2024 and sell it today you would earn a total of  1.00  from holding Torex Gold Resources or generate 0.05% return on investment over 90 days.

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

Torex Gold Resources  vs.  Sandstorm Gold Ltd

Torex Gold Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Torex Gold Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Torex Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unfluctuating 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.

Pair Trading with Torex Gold and Sandstorm Gold

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

The idea behind Torex Gold Resources and Sandstorm Gold Ltd 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.