Correlation Between Sandfire Resources and Chilwa Minerals
Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Chilwa Minerals 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 Chilwa Minerals 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 Chilwa Minerals Limited, you can compare the effects of market volatilities on Sandfire Resources and Chilwa Minerals 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 Chilwa Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Chilwa Minerals.
Diversification Opportunities for Sandfire Resources and Chilwa Minerals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sandfire and Chilwa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Chilwa Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chilwa Minerals 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 Chilwa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chilwa Minerals has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Chilwa Minerals go up and down completely randomly.
Pair Corralation between Sandfire Resources and Chilwa Minerals
Assuming the 90 days trading horizon Sandfire Resources is expected to generate 5.05 times less return on investment than Chilwa Minerals. But when comparing it to its historical volatility, Sandfire Resources NL is 2.78 times less risky than Chilwa Minerals. It trades about 0.05 of its potential returns per unit of risk. Chilwa Minerals Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Chilwa Minerals Limited on October 21, 2024 and sell it today you would earn a total of 62.00 from holding Chilwa Minerals Limited or generate 344.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 78.44% |
| Values | Daily Returns |
Sandfire Resources NL vs. Chilwa Minerals Limited
Performance |
| Timeline |
| Sandfire Resources |
| Chilwa Minerals |
Sandfire Resources and Chilwa Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandfire Resources and Chilwa Minerals
The main advantage of trading using opposite Sandfire Resources and Chilwa Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Chilwa Minerals 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 Chilwa Minerals will offset losses from the drop in Chilwa Minerals' long position.| Sandfire Resources vs. Duxton Broadacre Farms | Sandfire Resources vs. Flagship Investments | Sandfire Resources vs. A1 Investments Resources | Sandfire Resources vs. Auctus Alternative Investments |
| Chilwa Minerals vs. Insignia Financial | Chilwa Minerals vs. FireFly Metals | Chilwa Minerals vs. Land Homes Group | Chilwa Minerals vs. Australian Unity Office |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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