Correlation Between ALERION CLEANPOWER and Sandfire Resources

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

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

Diversification Opportunities for ALERION CLEANPOWER and Sandfire Resources

-0.1

Correlation Coefficient

ALERION CLEANPOWER  Sandfire Resources

Good diversification

The 3 months correlation between ALERION and Sandfire is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 ALERION CLEANPOWER i.e., ALERION CLEANPOWER and Sandfire Resources go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and Sandfire Resources

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to generate 0.74 times more return on investment than Sandfire Resources. However, ALERION CLEANPOWER is 1.34 times less risky than Sandfire Resources. It trades about -0.21 of its potential returns per unit of risk. Sandfire Resources Limited is currently generating about -0.17 per unit of risk. If you would invest  1,764  in ALERION CLEANPOWER on October 10, 2024 and sell it today you would lose (114.00) from holding ALERION CLEANPOWER or give up 6.46% of portfolio value over 90 days.

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

ALERION CLEANPOWER  vs.  Sandfire Resources Limited

ALERION CLEANPOWER

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALERION CLEANPOWER are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ALERION CLEANPOWER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 ALERION CLEANPOWER and Sandfire Resources

The main advantage of trading using opposite ALERION CLEANPOWER and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.