Correlation Between Sandstorm Gold and Herc Holdings

Can any of the company-specific risk be diversified away by investing in both Sandstorm Gold and Herc Holdings 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 Herc Holdings 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 Herc Holdings, you can compare the effects of market volatilities on Sandstorm Gold and Herc Holdings 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 Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandstorm Gold and Herc Holdings.

Diversification Opportunities for Sandstorm Gold and Herc Holdings

-0.28

Correlation Coefficient

Sandstorm Gold  Herc Holdings

Very good diversification

The 3 months correlation between Sandstorm and Herc is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings 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 Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Herc Holdings go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Herc Holdings

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to under-perform the Herc Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Sandstorm Gold Ltd is 1.45 times less risky than Herc Holdings. The stock trades about -0.09 of its potential returns per unit of risk. The Herc Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  15,579  in Herc Holdings on September 22, 2024 and sell it today you would earn a total of  3,154  from holding Herc Holdings or generate 20.25% return on investment over 90 days.

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

Sandstorm Gold Ltd  vs.  Herc Holdings

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 latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Herc Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandstorm Gold and Herc Holdings

The main advantage of trading using opposite Sandstorm Gold and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandstorm Gold position performs unexpectedly, Herc Holdings 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 Herc Holdings will offset losses from the drop in Herc Holdings' long position.

The idea behind Sandstorm Gold Ltd and Herc Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.