Correlation Between EBRO FOODS and Sandfire Resources
Can any of the company-specific risk be diversified away by investing in both EBRO FOODS and Sandfire 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 EBRO FOODS and Sandfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EBRO FOODS and Sandfire Resources Limited, you can compare the effects of market volatilities on EBRO FOODS and Sandfire 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 EBRO FOODS with a short position of Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBRO FOODS and Sandfire Resources.
Diversification Opportunities for EBRO FOODS and Sandfire Resources
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between EBRO and Sandfire is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding EBRO FOODS and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and EBRO FOODS 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 EBRO FOODS are associated (or correlated) with Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of EBRO FOODS i.e., EBRO FOODS and Sandfire Resources go up and down completely randomly.
Pair Corralation between EBRO FOODS and Sandfire Resources
Assuming the 90 days trading horizon EBRO FOODS is expected to generate 3.04 times less return on investment than Sandfire Resources. But when comparing it to its historical volatility, EBRO FOODS is 1.66 times less risky than Sandfire Resources. It trades about 0.03 of its potential returns per unit of risk. Sandfire Resources Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 361.00 in Sandfire Resources Limited on September 26, 2024 and sell it today you would earn a total of 199.00 from holding Sandfire Resources Limited or generate 55.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
EBRO FOODS vs. Sandfire Resources Limited
Performance |
Timeline |
EBRO FOODS |
Sandfire Resources |
EBRO FOODS and Sandfire Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EBRO FOODS and Sandfire Resources
The main advantage of trading using opposite EBRO FOODS and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBRO FOODS position performs unexpectedly, Sandfire 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 Sandfire Resources will offset losses from the drop in Sandfire Resources' long position.The idea behind EBRO FOODS and Sandfire Resources Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Sandfire Resources vs. EBRO FOODS | Sandfire Resources vs. Astral Foods Limited | Sandfire Resources vs. MOLSON RS BEVERAGE | Sandfire Resources vs. Tyson Foods |
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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