Correlation Between GIBB River and Sandfire Resources

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

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

Diversification Opportunities for GIBB River and Sandfire Resources

-0.24

Correlation Coefficient

GIBB River  Sandfire Resources

Very good diversification

The 3 months correlation between GIBB and Sandfire is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding GIBB River Diamonds and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and GIBB River 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 GIBB River Diamonds 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 GIBB River i.e., GIBB River and Sandfire Resources go up and down completely randomly.

Pair Corralation between GIBB River and Sandfire Resources

Assuming the 90 days trading horizon GIBB River Diamonds is expected to generate 3.51 times more return on investment than Sandfire Resources. However, GIBB River is 3.51 times more volatile than Sandfire Resources NL. It trades about 0.03 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about -0.02 per unit of risk. If you would invest  4.10  in GIBB River Diamonds on October 24, 2024 and sell it today you would earn a total of  0.00  from holding GIBB River Diamonds or generate 0.0% return on investment over 90 days.

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

GIBB River Diamonds  vs.  Sandfire Resources NL

GIBB River Diamonds

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GIBB River Diamonds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, GIBB River 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 NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sandfire Resources is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GIBB River and Sandfire Resources

The main advantage of trading using opposite GIBB River and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GIBB River 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 GIBB River Diamonds 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 Global Correlations module to find global opportunities by holding instruments from different markets.