Correlation Between Sandfire Resources and Brickworks

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

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

Diversification Opportunities for Sandfire Resources and Brickworks

0.7

Correlation Coefficient

Sandfire Resources  Brickworks

Poor diversification

The 3 months correlation between Sandfire and Brickworks is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Brickworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickworks and Sandfire 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 Sandfire Resources NL are associated (or correlated) with Brickworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickworks has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Brickworks go up and down completely randomly.

Pair Corralation between Sandfire Resources and Brickworks

Assuming the 90 days trading horizon Sandfire Resources NL is expected to under-perform the Brickworks. In addition to that, Sandfire Resources is 2.33 times more volatile than Brickworks. It trades about -0.23 of its total potential returns per unit of risk. Brickworks is currently generating about -0.04 per unit of volatility. If you would invest  2,600  in Brickworks on September 22, 2024 and sell it today you would lose (20.00) from holding Brickworks or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Sandfire Resources NL  vs.  Brickworks

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.

Brickworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Brickworks 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 Sandfire Resources and Brickworks

The main advantage of trading using opposite Sandfire Resources and Brickworks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Brickworks 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 Brickworks will offset losses from the drop in Brickworks' long position.

The idea behind Sandfire Resources NL and Brickworks 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.