Correlation Between Sandfire Resources and Legacy Iron

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

Diversification Opportunities for Sandfire Resources and Legacy Iron

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Sandfire and Legacy is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Legacy Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Iron Ore 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 Legacy Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Iron Ore has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Legacy Iron go up and down completely randomly.

Pair Corralation between Sandfire Resources and Legacy Iron

Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.59 times more return on investment than Legacy Iron. However, Sandfire Resources NL is 1.68 times less risky than Legacy Iron. It trades about 0.22 of its potential returns per unit of risk. Legacy Iron Ore is currently generating about -0.11 per unit of risk. If you would invest  815.00  in Sandfire Resources NL on September 5, 2024 and sell it today you would earn a total of  229.00  from holding Sandfire Resources NL or generate 28.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sandfire Resources NL  vs.  Legacy Iron Ore

 Performance 
       Timeline  
Sandfire Resources 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sandfire Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.
Legacy Iron Ore 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Legacy Iron Ore 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sandfire Resources and Legacy Iron Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sandfire Resources and Legacy Iron

The main advantage of trading using opposite Sandfire Resources and Legacy Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Legacy Iron 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 Legacy Iron will offset losses from the drop in Legacy Iron's long position.
The idea behind Sandfire Resources NL and Legacy Iron Ore 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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