Correlation Between Critical Elements and Glencore PLC

Can any of the company-specific risk be diversified away by investing in both Critical Elements and Glencore PLC 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 Critical Elements and Glencore PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Critical Elements and Glencore PLC ADR, you can compare the effects of market volatilities on Critical Elements and Glencore PLC 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 Critical Elements with a short position of Glencore PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Glencore PLC.

Diversification Opportunities for Critical Elements and Glencore PLC

0.9

Correlation Coefficient

Critical Elements  Glencore PLC

Almost no diversification

The 3 months correlation between Critical and Glencore is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Glencore PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC ADR and Critical Elements 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 Critical Elements are associated (or correlated) with Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC ADR has no effect on the direction of Critical Elements i.e., Critical Elements and Glencore PLC go up and down completely randomly.

Pair Corralation between Critical Elements and Glencore PLC

Assuming the 90 days horizon Critical Elements is expected to under-perform the Glencore PLC. In addition to that, Critical Elements is 2.69 times more volatile than Glencore PLC ADR. It trades about -0.02 of its total potential returns per unit of risk. Glencore PLC ADR is currently generating about -0.04 per unit of volatility. If you would invest  1,107  in Glencore PLC ADR on October 7, 2024 and sell it today you would lose (214.00) from holding Glencore PLC ADR or give up 19.33% of portfolio value over 90 days.

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

Critical Elements  vs.  Glencore PLC ADR

Critical Elements

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Critical Elements has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Glencore PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Critical Elements and Glencore PLC

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

The idea behind Critical Elements and Glencore PLC ADR 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.