Correlation Between Sandstorm Gold and African Agriculture
Can any of the company-specific risk be diversified away by investing in both Sandstorm Gold and African Agriculture 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 African Agriculture 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 African Agriculture Holdings, you can compare the effects of market volatilities on Sandstorm Gold and African Agriculture 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 African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandstorm Gold and African Agriculture.
Diversification Opportunities for Sandstorm Gold and African Agriculture
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sandstorm and African is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture 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 African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and African Agriculture go up and down completely randomly.
Pair Corralation between Sandstorm Gold and African Agriculture
Given the investment horizon of 90 days Sandstorm Gold is expected to generate 30.81 times less return on investment than African Agriculture. But when comparing it to its historical volatility, Sandstorm Gold Ltd is 14.43 times less risky than African Agriculture. It trades about 0.03 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6.59 in African Agriculture Holdings on September 12, 2024 and sell it today you would lose (6.22) from holding African Agriculture Holdings or give up 94.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 77.04% |
| Values | Daily Returns |
Sandstorm Gold Ltd vs. African Agriculture Holdings
Performance |
| Timeline |
| Sandstorm Gold |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Sandstorm Gold and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandstorm Gold and African Agriculture
The main advantage of trading using opposite Sandstorm Gold and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandstorm Gold position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| Sandstorm Gold vs. Franco Nevada | Sandstorm Gold vs. Royal Gold | Sandstorm Gold vs. Alamos Gold | Sandstorm Gold vs. Seabridge Gold |
| African Agriculture vs. Sabre Corpo | African Agriculture vs. Verde Clean Fuels | African Agriculture vs. Sandstorm Gold Ltd | African Agriculture vs. Eldorado Gold Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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