Correlation Between Sandfire Resources and Stellar AfricaGold

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

By analyzing existing cross correlation between Sandfire Resources America and Stellar AfricaGold, you can compare the effects of market volatilities on Sandfire Resources and Stellar AfricaGold 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 Stellar AfricaGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandfire Resources and Stellar AfricaGold.

Diversification Opportunities for Sandfire Resources and Stellar AfricaGold

0.11

Correlation Coefficient

Sandfire Resources  Stellar AfricaGold

Average diversification

The 3 months correlation between Sandfire and Stellar is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources America and Stellar AfricaGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellar AfricaGold 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 America are associated (or correlated) with Stellar AfricaGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellar AfricaGold has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Stellar AfricaGold go up and down completely randomly.

Pair Corralation between Sandfire Resources and Stellar AfricaGold

Assuming the 90 days horizon Sandfire Resources America is expected to generate 0.49 times more return on investment than Stellar AfricaGold. However, Sandfire Resources America is 2.04 times less risky than Stellar AfricaGold. It trades about 0.04 of its potential returns per unit of risk. Stellar AfricaGold is currently generating about 0.01 per unit of risk. If you would invest  29.00  in Sandfire Resources America on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Sandfire Resources America or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sandfire Resources America  vs.  Stellar AfricaGold

Sandfire Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources America are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sandfire Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Stellar AfricaGold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellar AfricaGold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unfluctuating basic indicators, Stellar AfricaGold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sandfire Resources and Stellar AfricaGold

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

The idea behind Sandfire Resources America and Stellar AfricaGold 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.