Correlation Between Rio2 and Sandstorm Gold
Can any of the company-specific risk be diversified away by investing in both Rio2 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 Rio2 and Sandstorm Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio2 Limited and Sandstorm Gold Ltd, you can compare the effects of market volatilities on Rio2 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 Rio2 with a short position of Sandstorm Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and Sandstorm Gold.
Diversification Opportunities for Rio2 and Sandstorm Gold
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rio2 and Sandstorm is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 Limited and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Rio2 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 Rio2 Limited 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 Rio2 i.e., Rio2 and Sandstorm Gold go up and down completely randomly.
Pair Corralation between Rio2 and Sandstorm Gold
Assuming the 90 days horizon Rio2 Limited is expected to under-perform the Sandstorm Gold. But the otc stock apears to be less risky and, when comparing its historical volatility, Rio2 Limited is 1.11 times less risky than Sandstorm Gold. The otc stock trades about -0.1 of its potential returns per unit of risk. The Sandstorm Gold Ltd is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 607.00 in Sandstorm Gold Ltd on August 28, 2024 and sell it today you would lose (27.00) from holding Sandstorm Gold Ltd or give up 4.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio2 Limited vs. Sandstorm Gold Ltd
Performance |
| Timeline |
| Rio2 Limited |
| Sandstorm Gold |
Rio2 and Sandstorm Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio2 and Sandstorm Gold
The main advantage of trading using opposite Rio2 and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 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 Rio2 Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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