Correlation Between Sandfire Resources and RLF AgTech

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

Diversification Opportunities for Sandfire Resources and RLF AgTech

0.41

Correlation Coefficient

Sandfire Resources  RLF AgTech

Very weak diversification

The 3 months correlation between Sandfire and RLF is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and RLF AgTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLF AgTech 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 RLF AgTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLF AgTech has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and RLF AgTech go up and down completely randomly.

Pair Corralation between Sandfire Resources and RLF AgTech

Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.72 times more return on investment than RLF AgTech. However, Sandfire Resources NL is 1.38 times less risky than RLF AgTech. It trades about 0.11 of its potential returns per unit of risk. RLF AgTech is currently generating about 0.06 per unit of risk. If you would invest  882.00  in Sandfire Resources NL on September 15, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Sandfire Resources NL  vs.  RLF AgTech

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.

RLF AgTech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RLF AgTech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, RLF AgTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sandfire Resources and RLF AgTech

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

The idea behind Sandfire Resources NL and RLF AgTech 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 Transaction History module to view history of all your transactions and understand their impact on performance.