Correlation Between Macquarie Bank and Sandfire Resources

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Can any of the company-specific risk be diversified away by investing in both Macquarie Bank 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 Macquarie Bank and Sandfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Bank Limited and Sandfire Resources NL, you can compare the effects of market volatilities on Macquarie Bank 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 Macquarie Bank with a short position of Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Bank and Sandfire Resources.

Diversification Opportunities for Macquarie Bank and Sandfire Resources

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Macquarie and Sandfire is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank i.e., Macquarie Bank and Sandfire Resources go up and down completely randomly.

Pair Corralation between Macquarie Bank and Sandfire Resources

Assuming the 90 days trading horizon Macquarie Bank is expected to generate 3.79 times less return on investment than Sandfire Resources. But when comparing it to its historical volatility, Macquarie Bank Limited is 4.76 times less risky than Sandfire Resources. It trades about 0.06 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  628.00  in Sandfire Resources NL on October 6, 2024 and sell it today you would earn a total of  302.00  from holding Sandfire Resources NL or generate 48.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Macquarie Bank Limited  vs.  Sandfire Resources NL

 Performance 
       Timeline  
Macquarie Bank 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Sandfire Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Macquarie Bank and Sandfire Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Macquarie Bank and Sandfire Resources

The main advantage of trading using opposite Macquarie Bank and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Bank 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 Macquarie Bank 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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