Correlation Between Everest Metals and Sandfire Resources

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

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

Diversification Opportunities for Everest Metals and Sandfire Resources

0.84

Correlation Coefficient

Everest Metals  Sandfire Resources

Very poor diversification

The 3 months correlation between Everest and Sandfire is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Everest Metals and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and Everest Metals 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 Everest Metals 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 Everest Metals i.e., Everest Metals and Sandfire Resources go up and down completely randomly.

Pair Corralation between Everest Metals and Sandfire Resources

Assuming the 90 days trading horizon Everest Metals is expected to generate 2.29 times more return on investment than Sandfire Resources. However, Everest Metals is 2.29 times more volatile than Sandfire Resources NL. It trades about 0.1 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.17 per unit of risk. If you would invest  13.00  in Everest Metals on December 23, 2024 and sell it today you would earn a total of  3.00  from holding Everest Metals or generate 23.08% return on investment over 90 days.

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

Everest Metals  vs.  Sandfire Resources NL

Everest Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everest Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Everest Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sandfire Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sandfire Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Everest Metals and Sandfire Resources

The main advantage of trading using opposite Everest Metals and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everest Metals 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 Everest Metals and Sandfire Resources NL 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.