Correlation Between Equinox Gold and Sandstorm Gold
Can any of the company-specific risk be diversified away by investing in both Equinox 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 Equinox 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 Equinox Gold Corp and Sandstorm Gold Ltd, you can compare the effects of market volatilities on Equinox 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 Equinox Gold with a short position of Sandstorm Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinox Gold and Sandstorm Gold.
Diversification Opportunities for Equinox Gold and Sandstorm Gold
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equinox and Sandstorm is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Equinox Gold Corp and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Equinox 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 Equinox Gold Corp 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 Equinox Gold i.e., Equinox Gold and Sandstorm Gold go up and down completely randomly.
Pair Corralation between Equinox Gold and Sandstorm Gold
Considering the 90-day investment horizon Equinox Gold Corp is expected to generate 1.35 times more return on investment than Sandstorm Gold. However, Equinox Gold is 1.35 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 -0.05 per unit of risk. If you would invest 571.00 in Equinox Gold Corp on August 27, 2024 and sell it today you would lose (1.00) from holding Equinox Gold Corp or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinox Gold Corp vs. Sandstorm Gold Ltd
Performance |
| Timeline |
| Equinox Gold Corp |
| Sandstorm Gold |
Equinox Gold and Sandstorm Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinox Gold and Sandstorm Gold
The main advantage of trading using opposite Equinox Gold and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinox 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 Equinox Gold Corp 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. Franco Nevada | Sandstorm Gold vs. Royal Gold | Sandstorm Gold vs. Alamos Gold | Sandstorm Gold vs. Seabridge Gold |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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