Correlation Between IAMGold and Sandstorm Gold

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

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

Diversification Opportunities for IAMGold and Sandstorm Gold

0.61

Correlation Coefficient

IAMGold  Sandstorm Gold

Poor diversification

The 3 months correlation between IAMGold and Sandstorm is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding IAMGold and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and IAMGold 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 IAMGold 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 IAMGold i.e., IAMGold and Sandstorm Gold go up and down completely randomly.

Pair Corralation between IAMGold and Sandstorm Gold

Considering the 90-day investment horizon IAMGold is expected to generate 1.68 times more return on investment than Sandstorm Gold. However, IAMGold is 1.68 times more volatile than Sandstorm Gold Ltd. It trades about 0.07 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  486.00  in IAMGold on September 3, 2024 and sell it today you would earn a total of  64.00  from holding IAMGold or generate 13.17% return on investment over 90 days.

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

IAMGold  vs.  Sandstorm Gold Ltd

IAMGold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, IAMGold reported solid returns over the last few months and may actually be approaching a breakup point.

Sandstorm Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sandstorm Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IAMGold and Sandstorm Gold

The main advantage of trading using opposite IAMGold and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAMGold 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 IAMGold 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.