Correlation Between Sandfire Resources and Greentech Metals
Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Greentech Metals 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 Greentech Metals 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 Greentech Metals, you can compare the effects of market volatilities on Sandfire Resources and Greentech Metals 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 Greentech Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Greentech Metals.
Diversification Opportunities for Sandfire Resources and Greentech Metals
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandfire and Greentech is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Greentech Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greentech Metals 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 Greentech Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greentech Metals has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Greentech Metals go up and down completely randomly.
Pair Corralation between Sandfire Resources and Greentech Metals
Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.18 times more return on investment than Greentech Metals. However, Sandfire Resources NL is 5.49 times less risky than Greentech Metals. It trades about -0.2 of its potential returns per unit of risk. Greentech Metals is currently generating about -0.15 per unit of risk. If you would invest 1,077 in Sandfire Resources NL on August 28, 2024 and sell it today you would lose (61.00) from holding Sandfire Resources NL or give up 5.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandfire Resources NL vs. Greentech Metals
Performance |
| Timeline |
| Sandfire Resources |
| Greentech Metals |
Sandfire Resources and Greentech Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandfire Resources and Greentech Metals
The main advantage of trading using opposite Sandfire Resources and Greentech Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Greentech Metals 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 Greentech Metals will offset losses from the drop in Greentech Metals' long position.| Sandfire Resources vs. Ainsworth Game Technology | Sandfire Resources vs. Air New Zealand | Sandfire Resources vs. Charter Hall Retail | Sandfire Resources vs. Toys R Us |
| Greentech Metals vs. Northern Star Resources | Greentech Metals vs. Evolution Mining | Greentech Metals vs. Bluescope Steel | Greentech Metals vs. Sandfire Resources NL |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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