Correlation Between Sandfire Resources and Peel Mining

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

Diversification Opportunities for Sandfire Resources and Peel Mining

-0.25

Correlation Coefficient

Sandfire Resources  Peel Mining

Very good diversification

The 3 months correlation between Sandfire and Peel is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Peel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Peel Mining go up and down completely randomly.

Pair Corralation between Sandfire Resources and Peel Mining

Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.52 times more return on investment than Peel Mining. However, Sandfire Resources NL is 1.94 times less risky than Peel Mining. It trades about 0.02 of its potential returns per unit of risk. Peel Mining is currently generating about -0.02 per unit of risk. If you would invest  1,034  in Sandfire Resources NL on November 28, 2024 and sell it today you would earn a total of  18.00  from holding Sandfire Resources NL or generate 1.74% return on investment over 90 days.

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

Sandfire Resources NL  vs.  Peel Mining

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 1 (%) 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.

Peel Mining

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Sandfire Resources NL and Peel Mining 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.