Correlation Between Sandfire Resources and Caravel Minerals

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

Diversification Opportunities for Sandfire Resources and Caravel Minerals

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Sandfire and Caravel is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Caravel Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravel Minerals 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 Caravel Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravel Minerals has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Caravel Minerals go up and down completely randomly.

Pair Corralation between Sandfire Resources and Caravel Minerals

Assuming the 90 days trading horizon Sandfire Resources is expected to generate 1.18 times less return on investment than Caravel Minerals. But when comparing it to its historical volatility, Sandfire Resources NL is 2.45 times less risky than Caravel Minerals. It trades about 0.06 of its potential returns per unit of risk. Caravel Minerals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Caravel Minerals on September 24, 2024 and sell it today you would earn a total of  1.00  from holding Caravel Minerals or generate 5.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sandfire Resources NL  vs.  Caravel Minerals

 Performance 
       Timeline  
Sandfire Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 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.
Caravel Minerals 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Caravel Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caravel Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sandfire Resources and Caravel Minerals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sandfire Resources and Caravel Minerals

The main advantage of trading using opposite Sandfire Resources and Caravel Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandfire Resources position performs unexpectedly, Caravel Minerals 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 Caravel Minerals will offset losses from the drop in Caravel Minerals' long position.
The idea behind Sandfire Resources NL and Caravel Minerals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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