Correlation Between Stellar AfricaGold and Sandfire Resources

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

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

Diversification Opportunities for Stellar AfricaGold and Sandfire Resources

0.11

Correlation Coefficient

Stellar AfricaGold  Sandfire Resources

Average diversification

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

Pair Corralation between Stellar AfricaGold and Sandfire Resources

Assuming the 90 days horizon Stellar AfricaGold is expected to generate 1.56 times less return on investment than Sandfire Resources. In addition to that, Stellar AfricaGold is 2.04 times more volatile than Sandfire Resources America. It trades about 0.01 of its total potential returns per unit of risk. Sandfire Resources America is currently generating about 0.04 per unit of volatility. 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

Stellar AfricaGold  vs.  Sandfire Resources America

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.

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.

Pair Trading with Stellar AfricaGold and Sandfire Resources

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

The idea behind Stellar AfricaGold and Sandfire Resources America 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 Stocks Directory module to find actively traded stocks across global markets.