Correlation Between Garda Diversified and Sandfire Resources

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

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

Diversification Opportunities for Garda Diversified and Sandfire Resources

0.65

Correlation Coefficient

Garda Diversified  Sandfire Resources

Poor diversification

The 3 months correlation between Garda and Sandfire is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Garda Diversified Ppty and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and Garda Diversified 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 Garda Diversified Ppty 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 Garda Diversified i.e., Garda Diversified and Sandfire Resources go up and down completely randomly.

Pair Corralation between Garda Diversified and Sandfire Resources

Assuming the 90 days trading horizon Garda Diversified is expected to generate 1.55 times less return on investment than Sandfire Resources. But when comparing it to its historical volatility, Garda Diversified Ppty is 1.27 times less risky than Sandfire Resources. It trades about 0.13 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  859.00  in Sandfire Resources NL on September 2, 2024 and sell it today you would earn a total of  178.00  from holding Sandfire Resources NL or generate 20.72% return on investment over 90 days.

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

Garda Diversified Ppty  vs.  Sandfire Resources NL

Garda Diversified Ppty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garda Diversified Ppty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garda Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sandfire Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 12 (%) 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 Garda Diversified and Sandfire Resources

The main advantage of trading using opposite Garda Diversified and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garda Diversified 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 Garda Diversified Ppty 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.