Correlation Between Sandstorm Gold and Methanex

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

Diversification Opportunities for Sandstorm Gold and Methanex

-0.45

Correlation Coefficient

Sandstorm Gold  Methanex

Very good diversification

The 3 months correlation between Sandstorm and Methanex is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Methanex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanex 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 Methanex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methanex has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Methanex go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Methanex

Given the investment horizon of 90 days Sandstorm Gold is expected to generate 1.14 times less return on investment than Methanex. In addition to that, Sandstorm Gold is 1.02 times more volatile than Methanex. It trades about 0.04 of its total potential returns per unit of risk. Methanex is currently generating about 0.05 per unit of volatility. If you would invest  4,430  in Methanex on August 31, 2024 and sell it today you would earn a total of  222.00  from holding Methanex or generate 5.01% return on investment over 90 days.

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

Sandstorm Gold Ltd  vs.  Methanex

Sandstorm Gold

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 3 (%) 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.

Methanex

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Methanex may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sandstorm Gold and Methanex

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

The idea behind Sandstorm Gold Ltd and Methanex 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.