Correlation Between Pan American and Sandstorm Gold

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

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

Diversification Opportunities for Pan American and Sandstorm Gold

0.55

Correlation Coefficient

Pan American  Sandstorm Gold

Very weak diversification

The 3 months correlation between Pan and Sandstorm is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold and Pan American 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 Pan American Silver 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 Pan American i.e., Pan American and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Pan American and Sandstorm Gold

Given the investment horizon of 90 days Pan American Silver is expected to generate 1.23 times more return on investment than Sandstorm Gold. However, Pan American is 1.23 times more volatile than Sandstorm Gold Ltd. It trades about 0.09 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  1,906  in Pan American Silver on September 2, 2024 and sell it today you would earn a total of  291.00  from holding Pan American Silver or generate 15.27% return on investment over 90 days.

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

Pan American Silver  vs.  Sandstorm Gold Ltd

Pan American Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pan American and Sandstorm Gold

The main advantage of trading using opposite Pan American and Sandstorm Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American 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 Pan American Silver 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.