Correlation Between Glencore PLC and Asia Broadband

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

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

Diversification Opportunities for Glencore PLC and Asia Broadband

0.36

Correlation Coefficient

Glencore PLC  Asia Broadband

Weak diversification

The 3 months correlation between Glencore and Asia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Asia Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Broadband and Glencore PLC 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 Glencore PLC are associated (or correlated) with Asia Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Broadband has no effect on the direction of Glencore PLC i.e., Glencore PLC and Asia Broadband go up and down completely randomly.

Pair Corralation between Glencore PLC and Asia Broadband

Assuming the 90 days horizon Glencore PLC is expected to under-perform the Asia Broadband. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC is 2.96 times less risky than Asia Broadband. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Asia Broadband is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3.45  in Asia Broadband on September 12, 2024 and sell it today you would lose (1.05) from holding Asia Broadband or give up 30.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Glencore PLC  vs.  Asia Broadband

Glencore PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Glencore PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Asia Broadband

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Broadband 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 drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Glencore PLC and Asia Broadband

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

The idea behind Glencore PLC and Asia Broadband 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.