Correlation Between Embark Education and Sandfire Resources

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

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

Diversification Opportunities for Embark Education and Sandfire Resources

0.36

Correlation Coefficient

Embark Education  Sandfire Resources

Weak diversification

The 3 months correlation between Embark and Sandfire is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Embark Education Group and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and Embark Education 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 Embark Education 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 Embark Education i.e., Embark Education and Sandfire Resources go up and down completely randomly.

Pair Corralation between Embark Education and Sandfire Resources

Assuming the 90 days trading horizon Embark Education Group is expected to generate 0.89 times more return on investment than Sandfire Resources. However, Embark Education Group is 1.12 times less risky than Sandfire Resources. It trades about -0.05 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about -0.12 per unit of risk. If you would invest  80.00  in Embark Education Group on September 29, 2024 and sell it today you would lose (4.00) from holding Embark Education Group or give up 5.0% of portfolio value over 90 days.

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

Embark Education Group  vs.  Sandfire Resources NL

Embark Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embark Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Embark Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandfire Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Embark Education and Sandfire Resources

The main advantage of trading using opposite Embark Education and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embark Education 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 Embark Education Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.