Correlation Between Dalata Hotel and Sandfire Resources

Can any of the company-specific risk be diversified away by investing in both Dalata Hotel 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 Dalata Hotel and Sandfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dalata Hotel Group and Sandfire Resources Limited, you can compare the effects of market volatilities on Dalata Hotel 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 Dalata Hotel with a short position of Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalata Hotel and Sandfire Resources.

Diversification Opportunities for Dalata Hotel and Sandfire Resources

-0.7

Correlation Coefficient

Dalata Hotel  Sandfire Resources

Excellent diversification

The 3 months correlation between Dalata and Sandfire is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dalata Hotel Group and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and Dalata Hotel 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 Dalata Hotel Group 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 Dalata Hotel i.e., Dalata Hotel and Sandfire Resources go up and down completely randomly.

Pair Corralation between Dalata Hotel and Sandfire Resources

Assuming the 90 days horizon Dalata Hotel is expected to generate 2.69 times less return on investment than Sandfire Resources. But when comparing it to its historical volatility, Dalata Hotel Group is 1.31 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 0.07 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Sandfire Resources Limited on October 5, 2024 and sell it today you would earn a total of  170.00  from holding Sandfire Resources Limited or generate 44.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dalata Hotel Group  vs.  Sandfire Resources Limited

Dalata Hotel Group

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Dalata Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Dalata Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandfire Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Dalata Hotel and Sandfire Resources

The main advantage of trading using opposite Dalata Hotel and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dalata Hotel 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 Dalata Hotel Group 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.