Correlation Between EP Financial and Sandfire Resources

Can any of the company-specific risk be diversified away by investing in both EP 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 EP 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 EP Financial Group and Sandfire Resources NL, you can compare the effects of market volatilities on EP 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 EP Financial with a short position of Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of EP Financial and Sandfire Resources.

Diversification Opportunities for EP Financial and Sandfire Resources

-0.26

Correlation Coefficient

EP Financial  Sandfire Resources

Very good diversification

The 3 months correlation between EP1 and Sandfire is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding EP 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 EP 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 EP 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 EP Financial i.e., EP Financial and Sandfire Resources go up and down completely randomly.

Pair Corralation between EP Financial and Sandfire Resources

Assuming the 90 days trading horizon EP Financial Group is expected to generate 1.32 times more return on investment than Sandfire Resources. However, EP Financial is 1.32 times more volatile than Sandfire Resources NL. It trades about 0.08 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about -0.13 per unit of risk. If you would invest  50.00  in EP Financial Group on September 27, 2024 and sell it today you would earn a total of  2.00  from holding EP Financial Group or generate 4.0% return on investment over 90 days.

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

EP Financial Group  vs.  Sandfire Resources NL

EP Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EP Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandfire Resources NL 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 EP Financial and Sandfire Resources

The main advantage of trading using opposite EP Financial and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP 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 EP 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.