Correlation Between Glencore PLC and South32

Can any of the company-specific risk be diversified away by investing in both Glencore PLC and South32 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 South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Glencore PLC and South32, you can compare the effects of market volatilities on Glencore PLC and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and South32.

Diversification Opportunities for Glencore PLC and South32

0.45

Correlation Coefficient

Glencore PLC  South32

Very weak diversification

The 3 months correlation between Glencore and South32 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Glencore PLC i.e., Glencore PLC and South32 go up and down completely randomly.

Pair Corralation between Glencore PLC and South32

Assuming the 90 days trading horizon Glencore PLC is expected to generate 0.84 times more return on investment than South32. However, Glencore PLC is 1.19 times less risky than South32. It trades about -0.29 of its potential returns per unit of risk. South32 is currently generating about -0.4 per unit of risk. If you would invest  879,000  in Glencore PLC on September 24, 2024 and sell it today you would lose (67,800) from holding Glencore PLC or give up 7.71% of portfolio value over 90 days.

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

Glencore PLC  vs.  South32

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.

South32

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days South32 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, South32 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Glencore PLC and South32

The main advantage of trading using opposite Glencore PLC and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.

The idea behind Glencore PLC and South32 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.