Correlation Between SLM Corp and Gold Fields

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

By analyzing existing cross correlation between Sanlam and Gold Fields, you can compare the effects of market volatilities on SLM Corp and Gold Fields 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 SLM Corp with a short position of Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLM Corp and Gold Fields.

Diversification Opportunities for SLM Corp and Gold Fields

-0.26

Correlation Coefficient

SLM Corp  Gold Fields

Very good diversification

The 3 months correlation between SLM and Gold is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sanlam and Gold Fields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields and SLM Corp 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 Sanlam are associated (or correlated) with Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of SLM Corp i.e., SLM Corp and Gold Fields go up and down completely randomly.

Pair Corralation between SLM Corp and Gold Fields

Assuming the 90 days trading horizon SLM Corp is expected to generate 98.42 times less return on investment than Gold Fields. But when comparing it to its historical volatility, Sanlam is 1.98 times less risky than Gold Fields. It trades about 0.01 of its potential returns per unit of risk. Gold Fields is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,460,673  in Gold Fields on December 27, 2024 and sell it today you would earn a total of  1,309,327  from holding Gold Fields or generate 53.21% return on investment over 90 days.

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

Sanlam  vs.  Gold Fields

SLM Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sanlam has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SLM Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gold Fields

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Gold Fields exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SLM Corp and Gold Fields

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

The idea behind Sanlam and Gold Fields 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.