Correlation Between Falcon Metals and Sandfire Resources

Can any of the company-specific risk be diversified away by investing in both Falcon 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 Falcon 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 Falcon Metals and Sandfire Resources NL, you can compare the effects of market volatilities on Falcon 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 Falcon Metals with a short position of Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and Sandfire Resources.

Diversification Opportunities for Falcon Metals and Sandfire Resources

0.65

Correlation Coefficient

Falcon Metals  Sandfire Resources

Poor diversification

The 3 months correlation between Falcon and Sandfire is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Falcon 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 Falcon 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 Falcon 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 Falcon Metals i.e., Falcon Metals and Sandfire Resources go up and down completely randomly.

Pair Corralation between Falcon Metals and Sandfire Resources

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Sandfire Resources. In addition to that, Falcon Metals is 2.46 times more volatile than Sandfire Resources NL. It trades about -0.12 of its total potential returns per unit of risk. Sandfire Resources NL is currently generating about -0.13 per unit of volatility. If you would invest  1,017  in Sandfire Resources NL on September 27, 2024 and sell it today you would lose (62.00) from holding Sandfire Resources NL or give up 6.1% of portfolio value over 90 days.

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

Falcon Metals  vs.  Sandfire Resources NL

Falcon Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 Falcon Metals and Sandfire Resources

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

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.