Correlation Between Dundee Precious and Sandstorm Gold

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

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

Diversification Opportunities for Dundee Precious and Sandstorm Gold

0.66

Correlation Coefficient

Dundee Precious  Sandstorm Gold

Poor diversification

The 3 months correlation between Dundee and Sandstorm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Dundee Precious 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 Dundee Precious Metals 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 Dundee Precious i.e., Dundee Precious and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Dundee Precious and Sandstorm Gold

Assuming the 90 days trading horizon Dundee Precious Metals is expected to generate 0.77 times more return on investment than Sandstorm Gold. However, Dundee Precious Metals is 1.3 times less risky than Sandstorm Gold. It trades about 0.0 of its potential returns per unit of risk. Sandstorm Gold Ltd is currently generating about -0.03 per unit of risk. If you would invest  1,343  in Dundee Precious Metals on September 14, 2024 and sell it today you would lose (5.00) from holding Dundee Precious Metals or give up 0.37% of portfolio value over 90 days.

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

Dundee Precious Metals  vs.  Sandstorm Gold Ltd

Dundee Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dundee Precious Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Dundee Precious is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 very healthy essential indicators, Sandstorm Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dundee Precious and Sandstorm Gold

The main advantage of trading using opposite Dundee Precious and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dundee Precious 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 Dundee Precious Metals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..