Correlation Between Sandfire Resources and Patriot Battery

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

Diversification Opportunities for Sandfire Resources and Patriot Battery

0.28

Correlation Coefficient

Sandfire Resources  Patriot Battery

Modest diversification

The 3 months correlation between Sandfire and Patriot is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery Metals 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 Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Patriot Battery go up and down completely randomly.

Pair Corralation between Sandfire Resources and Patriot Battery

Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.4 times more return on investment than Patriot Battery. However, Sandfire Resources NL is 2.52 times less risky than Patriot Battery. It trades about 0.11 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about -0.04 per unit of risk. If you would invest  882.00  in Sandfire Resources NL on September 16, 2024 and sell it today you would earn a total of  114.00  from holding Sandfire Resources NL or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sandfire Resources NL  vs.  Patriot Battery Metals

Sandfire Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 8 (%) 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.

Patriot Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patriot Battery Metals 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 Patriot Battery

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

The idea behind Sandfire Resources NL and Patriot Battery Metals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.