Correlation Between Glencore PLC and Alligator Energy

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

By analyzing existing cross correlation between Glencore PLC and Alligator Energy Limited, you can compare the effects of market volatilities on Glencore PLC and Alligator Energy 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 Alligator Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Alligator Energy.

Diversification Opportunities for Glencore PLC and Alligator Energy

0.7

Correlation Coefficient

Glencore PLC  Alligator Energy

Poor diversification

The 3 months correlation between Glencore and Alligator is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Alligator Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alligator Energy 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 Alligator Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alligator Energy has no effect on the direction of Glencore PLC i.e., Glencore PLC and Alligator Energy go up and down completely randomly.

Pair Corralation between Glencore PLC and Alligator Energy

Assuming the 90 days horizon Glencore PLC is expected to under-perform the Alligator Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC is 7.22 times less risky than Alligator Energy. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Alligator Energy Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Alligator Energy Limited on October 10, 2024 and sell it today you would lose (0.14) from holding Alligator Energy Limited or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Glencore PLC  vs.  Alligator Energy Limited

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 weak performance in the last few months, the Stock's basic 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.

Alligator Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alligator Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alligator Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glencore PLC and Alligator Energy

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

The idea behind Glencore PLC and Alligator Energy Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.