Correlation Between First Quantum and Sandfire Resources

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

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

Diversification Opportunities for First Quantum and Sandfire Resources

-0.29

Correlation Coefficient

First Quantum  Sandfire Resources

Very good diversification

The 3 months correlation between First and Sandfire is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and First Quantum 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 First Quantum Minerals 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 First Quantum i.e., First Quantum and Sandfire Resources go up and down completely randomly.

Pair Corralation between First Quantum and Sandfire Resources

Assuming the 90 days horizon First Quantum is expected to generate 1.03 times less return on investment than Sandfire Resources. In addition to that, First Quantum is 1.39 times more volatile than Sandfire Resources Limited. It trades about 0.05 of its total potential returns per unit of risk. Sandfire Resources Limited is currently generating about 0.07 per unit of volatility. If you would invest  500.00  in Sandfire Resources Limited on October 20, 2024 and sell it today you would earn a total of  90.00  from holding Sandfire Resources Limited or generate 18.0% return on investment over 90 days.

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

First Quantum Minerals  vs.  Sandfire Resources Limited

First Quantum Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Quantum 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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with First Quantum and Sandfire Resources

The main advantage of trading using opposite First Quantum and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Quantum 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 First Quantum Minerals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .