Correlation Between Sandfire Resources and Slam Exploration

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

Diversification Opportunities for Sandfire Resources and Slam Exploration

-0.1

Correlation Coefficient

Sandfire Resources  Slam Exploration

Good diversification

The 3 months correlation between Sandfire and Slam is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sandfire Resources America and Slam Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slam Exploration 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 Slam Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slam Exploration has no effect on the direction of Sandfire Resources i.e., Sandfire Resources and Slam Exploration go up and down completely randomly.

Pair Corralation between Sandfire Resources and Slam Exploration

Assuming the 90 days horizon Sandfire Resources is expected to generate 1.68 times less return on investment than Slam Exploration. But when comparing it to its historical volatility, Sandfire Resources America is 2.31 times less risky than Slam Exploration. It trades about 0.04 of its potential returns per unit of risk. Slam Exploration is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Slam Exploration on September 21, 2024 and sell it today you would lose (1.00) from holding Slam Exploration or give up 25.0% of portfolio value over 90 days.

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

Sandfire Resources America  vs.  Slam Exploration

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.

Slam Exploration

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Sandfire Resources and Slam Exploration

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

The idea behind Sandfire Resources America and Slam Exploration 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.