Correlation Between Sandfire Resources and Lynas Rare
Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Lynas Rare 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 Lynas Rare 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 Lynas Rare Earths, you can compare the effects of market volatilities on Sandfire Resources and Lynas Rare 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 Lynas Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Lynas Rare.
Diversification Opportunities for Sandfire Resources and Lynas Rare
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandfire and Lynas is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths 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 Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Lynas Rare go up and down completely randomly.
Pair Corralation between Sandfire Resources and Lynas Rare
Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.69 times more return on investment than Lynas Rare. However, Sandfire Resources NL is 1.46 times less risky than Lynas Rare. It trades about 0.02 of its potential returns per unit of risk. Lynas Rare Earths is currently generating about -0.33 per unit of risk. If you would invest 1,029 in Sandfire Resources NL on August 31, 2024 and sell it today you would earn a total of 5.00 from holding Sandfire Resources NL or generate 0.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Sandfire Resources NL vs. Lynas Rare Earths
Performance |
Timeline |
Sandfire Resources |
Lynas Rare Earths |
Sandfire Resources and Lynas Rare Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sandfire Resources and Lynas Rare
The main advantage of trading using opposite Sandfire Resources and Lynas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Lynas Rare 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 Lynas Rare will offset losses from the drop in Lynas Rare's long position.Sandfire Resources vs. Aurelia Metals | Sandfire Resources vs. Step One Clothing | Sandfire Resources vs. Thorney Technologies | Sandfire Resources vs. Computershare |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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