Correlation Between Sandfire Resources and Carawine Resources

Can any of the company-specific risk be diversified away by investing in both Sandfire Resources and Carawine 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 Sandfire Resources and Carawine Resources 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 Carawine Resources Limited, you can compare the effects of market volatilities on Sandfire Resources and Carawine 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 Sandfire Resources with a short position of Carawine Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Carawine Resources.

Diversification Opportunities for Sandfire Resources and Carawine Resources

0.1

Correlation Coefficient

Sandfire Resources  Carawine Resources

Average diversification

The 3 months correlation between Sandfire and Carawine is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources 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 Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Carawine Resources go up and down completely randomly.

Pair Corralation between Sandfire Resources and Carawine Resources

Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.54 times more return on investment than Carawine Resources. However, Sandfire Resources NL is 1.86 times less risky than Carawine Resources. It trades about 0.07 of its potential returns per unit of risk. Carawine Resources Limited is currently generating about 0.02 per unit of risk. If you would invest  572.00  in Sandfire Resources NL on November 28, 2024 and sell it today you would earn a total of  480.00  from holding Sandfire Resources NL or generate 83.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sandfire Resources NL  vs.  Carawine Resources Limited

Sandfire Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Carawine Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carawine Resources Limited 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 Sandfire Resources and Carawine Resources

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

The idea behind Sandfire Resources NL and Carawine 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.