Correlation Between Sandfire Resources and Australia United
Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Australia United 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 Sandfire Resources and Australia United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandfire Resources NL and Australia United Mining, you can compare the effects of market volatilities on Sandfire Resources and Australia United 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 Sandfire Resources with a short position of Australia United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Australia United.
Diversification Opportunities for Sandfire Resources and Australia United
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sandfire and Australia is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Australia United Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia United Mining and Sandfire Resources 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 Sandfire Resources NL are associated (or correlated) with Australia United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia United Mining has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Australia United go up and down completely randomly.
Pair Corralation between Sandfire Resources and Australia United
Assuming the 90 days trading horizon Sandfire Resources is expected to generate 1.52 times less return on investment than Australia United. But when comparing it to its historical volatility, Sandfire Resources NL is 3.73 times less risky than Australia United. It trades about 0.07 of its potential returns per unit of risk. Australia United Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.30 in Australia United Mining on September 13, 2024 and sell it today you would lose (0.10) from holding Australia United Mining or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandfire Resources NL vs. Australia United Mining
Performance |
| Timeline |
| Sandfire Resources |
| Australia United Mining |
Sandfire Resources and Australia United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandfire Resources and Australia United
The main advantage of trading using opposite Sandfire Resources and Australia United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Australia United 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 Australia United will offset losses from the drop in Australia United's long position.| Sandfire Resources vs. Centuria Industrial Reit | Sandfire Resources vs. Strickland Metals | Sandfire Resources vs. Aurelia Metals | Sandfire Resources vs. Wt Financial Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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