Correlation Between Wt Financial and Sandfire Resources

Can any of the company-specific risk be diversified away by investing in both Wt Financial and Sandfire 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 Wt Financial and Sandfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wt Financial Group and Sandfire Resources NL, you can compare the effects of market volatilities on Wt Financial and Sandfire 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 Wt Financial with a short position of Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wt Financial and Sandfire Resources.

Diversification Opportunities for Wt Financial and Sandfire Resources

0.6

Correlation Coefficient

Wt Financial  Sandfire Resources

Poor diversification

The 3 months correlation between WTL and Sandfire is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wt Financial Group and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources and Wt Financial 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 Wt Financial Group are associated (or correlated) with Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Wt Financial i.e., Wt Financial and Sandfire Resources go up and down completely randomly.

Pair Corralation between Wt Financial and Sandfire Resources

Assuming the 90 days trading horizon Wt Financial Group is expected to generate 2.8 times more return on investment than Sandfire Resources. However, Wt Financial is 2.8 times more volatile than Sandfire Resources NL. It trades about 0.12 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.03 per unit of risk. If you would invest  9.50  in Wt Financial Group on December 4, 2024 and sell it today you would earn a total of  3.50  from holding Wt Financial Group or generate 36.84% return on investment over 90 days.

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

Wt Financial Group  vs.  Sandfire Resources NL

Wt Financial Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wt Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Wt Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Wt Financial and Sandfire Resources

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

The idea behind Wt Financial Group and Sandfire Resources NL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.