Correlation Between Sandfire Resources and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Lake Resources 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 Lake Resources 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 Lake Resources NL, you can compare the effects of market volatilities on Sandfire Resources and Lake Resources 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 Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Lake Resources.
Diversification Opportunities for Sandfire Resources and Lake Resources
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandfire and Lake is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Lake Resources go up and down completely randomly.
Pair Corralation between Sandfire Resources and Lake Resources
Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.49 times more return on investment than Lake Resources. However, Sandfire Resources NL is 2.06 times less risky than Lake Resources. It trades about -0.17 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.69 per unit of risk. If you would invest 1,077 in Sandfire Resources NL on August 27, 2024 and sell it today you would lose (50.00) from holding Sandfire Resources NL or give up 4.64% 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. Lake Resources NL
Performance |
| Timeline |
| Sandfire Resources |
| Lake Resources NL |
Sandfire Resources and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandfire Resources and Lake Resources
The main advantage of trading using opposite Sandfire Resources and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Lake Resources 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 Lake Resources will offset losses from the drop in Lake Resources' 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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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