Correlation Between Sandfire Resources and Sims

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

Diversification Opportunities for Sandfire Resources and Sims

0.91

Correlation Coefficient

Sandfire Resources  Sims

Almost no diversification

The 3 months correlation between Sandfire and Sims is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources NL and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims 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 Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Sims go up and down completely randomly.

Pair Corralation between Sandfire Resources and Sims

Assuming the 90 days trading horizon Sandfire Resources NL is expected to generate 0.84 times more return on investment than Sims. However, Sandfire Resources NL is 1.19 times less risky than Sims. It trades about 0.22 of its potential returns per unit of risk. Sims is currently generating about 0.17 per unit of risk. If you would invest  815.00  in Sandfire Resources NL on September 5, 2024 and sell it today you would earn a total of  229.00  from holding Sandfire Resources NL or generate 28.1% return on investment over 90 days.

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

Sandfire Resources NL  vs.  Sims

Sandfire Resources

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 17 (%) 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.

Sims

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sims are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Sims unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandfire Resources and Sims

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

The idea behind Sandfire Resources NL and Sims 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.