Correlation Between Sandfire Resources and Resource Base
Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Resource Base 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 Resource Base 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 Resource Base, you can compare the effects of market volatilities on Sandfire Resources and Resource Base 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 Resource Base. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Resource Base.
Diversification Opportunities for Sandfire Resources and Resource Base
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sandfire and Resource is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base 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 Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Resource Base go up and down completely randomly.
Pair Corralation between Sandfire Resources and Resource Base
Assuming the 90 days trading horizon Sandfire Resources is expected to generate 2.45 times less return on investment than Resource Base. But when comparing it to its historical volatility, Sandfire Resources NL is 2.79 times less risky than Resource Base. It trades about 0.07 of its potential returns per unit of risk. Resource Base is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3.40 in Resource Base on August 25, 2024 and sell it today you would earn a total of 0.30 from holding Resource Base or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandfire Resources NL vs. Resource Base
Performance |
| Timeline |
| Sandfire Resources |
| Resource Base |
Sandfire Resources and Resource Base Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandfire Resources and Resource Base
The main advantage of trading using opposite Sandfire Resources and Resource Base positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Resource Base 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 Resource Base will offset losses from the drop in Resource Base's long position.| Sandfire Resources vs. Hudson Investment Group | Sandfire Resources vs. Argo Investments | Sandfire Resources vs. Regal Investment | Sandfire Resources vs. Spirit Telecom |
| Resource Base vs. Northern Star Resources | Resource Base vs. Evolution Mining | Resource Base vs. Bluescope Steel | Resource Base 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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