Correlation Between Seabridge Gold and Royal Gold

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

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

Diversification Opportunities for Seabridge Gold and Royal Gold

0.21

Correlation Coefficient

Seabridge Gold  Royal Gold

Modest diversification

The 3 months correlation between Seabridge and Royal is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Seabridge Gold and Royal Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Gold and Seabridge 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 Seabridge Gold are associated (or correlated) with Royal Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Gold has no effect on the direction of Seabridge Gold i.e., Seabridge Gold and Royal Gold go up and down completely randomly.

Pair Corralation between Seabridge Gold and Royal Gold

Allowing for the 90-day total investment horizon Seabridge Gold is expected to generate 46.52 times less return on investment than Royal Gold. In addition to that, Seabridge Gold is 2.04 times more volatile than Royal Gold. It trades about 0.0 of its total potential returns per unit of risk. Royal Gold is currently generating about 0.19 per unit of volatility. If you would invest  14,050  in Royal Gold on February 3, 2025 and sell it today you would earn a total of  3,601  from holding Royal Gold or generate 25.63% return on investment over 90 days.

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

Seabridge Gold  vs.  Royal Gold

Seabridge Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seabridge Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seabridge Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Royal Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Royal Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seabridge Gold and Royal Gold

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

The idea behind Seabridge Gold and Royal Gold 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.