Correlation Between Glencore PLC and Pepkor Holdings

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

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

Diversification Opportunities for Glencore PLC and Pepkor Holdings

-0.54

Correlation Coefficient

Glencore PLC  Pepkor Holdings

Excellent diversification

The 3 months correlation between Glencore and Pepkor is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Pepkor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepkor Holdings 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 Pepkor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepkor Holdings has no effect on the direction of Glencore PLC i.e., Glencore PLC and Pepkor Holdings go up and down completely randomly.

Pair Corralation between Glencore PLC and Pepkor Holdings

Assuming the 90 days trading horizon Glencore PLC is expected to under-perform the Pepkor Holdings. In addition to that, Glencore PLC is 1.05 times more volatile than Pepkor Holdings. It trades about -0.1 of its total potential returns per unit of risk. Pepkor Holdings is currently generating about 0.2 per unit of volatility. If you would invest  176,500  in Pepkor Holdings on September 24, 2024 and sell it today you would earn a total of  121,300  from holding Pepkor Holdings or generate 68.73% return on investment over 90 days.

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

Glencore PLC  vs.  Pepkor Holdings

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. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pepkor Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glencore PLC and Pepkor Holdings

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

The idea behind Glencore PLC and Pepkor Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.