Correlation Between Labyrinth Resources and Sandfire Resources

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

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

Diversification Opportunities for Labyrinth Resources and Sandfire Resources

-0.38

Correlation Coefficient

Labyrinth Resources  Sandfire Resources

Very good diversification

The 3 months correlation between Labyrinth and Sandfire is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Labyrinth Resources Limited and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and Labyrinth Resources 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 Labyrinth Resources Limited 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 Labyrinth Resources i.e., Labyrinth Resources and Sandfire Resources go up and down completely randomly.

Pair Corralation between Labyrinth Resources and Sandfire Resources

Assuming the 90 days trading horizon Labyrinth Resources Limited is expected to generate 9.52 times more return on investment than Sandfire Resources. However, Labyrinth Resources is 9.52 times more volatile than Sandfire Resources NL. It trades about 0.14 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.04 per unit of risk. If you would invest  2.81  in Labyrinth Resources Limited on September 26, 2024 and sell it today you would earn a total of  21.19  from holding Labyrinth Resources Limited or generate 754.09% return on investment over 90 days.

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

Labyrinth Resources Limited  vs.  Sandfire Resources NL

Labyrinth Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Labyrinth Resources Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Labyrinth Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Labyrinth Resources and Sandfire Resources

The main advantage of trading using opposite Labyrinth Resources and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labyrinth Resources 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 Labyrinth Resources Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.