Correlation Between Eastern and Sandstorm Gold
Can any of the company-specific risk be diversified away by investing in both Eastern 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 Eastern and Sandstorm Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Sandstorm Gold Ltd, you can compare the effects of market volatilities on Eastern 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 Eastern with a short position of Sandstorm Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Sandstorm Gold.
Diversification Opportunities for Eastern and Sandstorm Gold
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Sandstorm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Eastern 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 Eastern Co 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 Eastern i.e., Eastern and Sandstorm Gold go up and down completely randomly.
Pair Corralation between Eastern and Sandstorm Gold
Considering the 90-day investment horizon Eastern Co is expected to generate 1.28 times more return on investment than Sandstorm Gold. However, Eastern is 1.28 times more volatile than Sandstorm Gold Ltd. It trades about 0.04 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about 0.02 per unit of risk. If you would invest 2,076 in Eastern Co on September 2, 2024 and sell it today you would earn a total of 796.00 from holding Eastern Co or generate 38.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Sandstorm Gold Ltd
Performance |
| Timeline |
| Eastern |
| Sandstorm Gold |
Eastern and Sandstorm Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Sandstorm Gold
The main advantage of trading using opposite Eastern and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co 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.| Sandstorm Gold vs. Fortitude Gold Corp | Sandstorm Gold vs. New Gold | Sandstorm Gold vs. Galiano Gold | Sandstorm Gold vs. GoldMining |
Check out your portfolio center.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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