Correlation Between Sandstorm Gold and Eldorado Gold

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

Diversification Opportunities for Sandstorm Gold and Eldorado Gold

0.63

Correlation Coefficient

Sandstorm Gold  Eldorado Gold

Poor diversification

The 3 months correlation between Sandstorm and Eldorado is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sandstorm Gold Ltd and Eldorado Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eldorado Gold Corp 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 Eldorado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eldorado Gold Corp has no effect on the direction of Sandstorm Gold i.e., Sandstorm Gold and Eldorado Gold go up and down completely randomly.

Pair Corralation between Sandstorm Gold and Eldorado Gold

Given the investment horizon of 90 days Sandstorm Gold Ltd is expected to under-perform the Eldorado Gold. But the stock apears to be less risky and, when comparing its historical volatility, Sandstorm Gold Ltd is 1.57 times less risky than Eldorado Gold. The stock trades about -0.11 of its potential returns per unit of risk. The Eldorado Gold Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,754  in Eldorado Gold Corp on July 23, 2024 and sell it today you would earn a total of  108.00  from holding Eldorado Gold Corp or generate 6.16% return on investment over 90 days.

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

Sandstorm Gold Ltd  vs.  Eldorado Gold Corp

Sandstorm Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sandstorm Gold Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Sandstorm Gold may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Eldorado Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Eldorado Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandstorm Gold and Eldorado Gold

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

The idea behind Sandstorm Gold Ltd and Eldorado Gold Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.