Correlation Between Sandstorm Gold and Wheaton Precious

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

Diversification Opportunities for Sandstorm Gold and Wheaton Precious

0.74

Correlation Coefficient

Sandstorm Gold  Wheaton Precious

Poor diversification

The 3 months correlation between Sandstorm and Wheaton is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Wheaton Precious go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Wheaton Precious

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to generate 1.17 times more return on investment than Wheaton Precious. However, Sandstorm Gold is 1.17 times more volatile than Wheaton Precious Metals. It trades about -0.06 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.1 per unit of risk. If you would invest  605.00  in Sandstorm Gold Ltd on September 1, 2024 and sell it today you would lose (26.00) from holding Sandstorm Gold Ltd or give up 4.3% of portfolio value over 90 days.

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

Sandstorm Gold Ltd  vs.  Wheaton Precious Metals

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.

Wheaton Precious Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wheaton Precious is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sandstorm Gold and Wheaton Precious

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

The idea behind Sandstorm Gold Ltd and Wheaton Precious Metals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.