Correlation Between Glencore PLC and Pilbara Minerals

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

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

Diversification Opportunities for Glencore PLC and Pilbara Minerals

0.78

Correlation Coefficient

Glencore PLC  Pilbara Minerals

Poor diversification

The 3 months correlation between Glencore and Pilbara is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Pilbara Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilbara Minerals 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 ADR are associated (or correlated) with Pilbara Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilbara Minerals has no effect on the direction of Glencore PLC i.e., Glencore PLC and Pilbara Minerals go up and down completely randomly.

Pair Corralation between Glencore PLC and Pilbara Minerals

Assuming the 90 days horizon Glencore PLC ADR is expected to under-perform the Pilbara Minerals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC ADR is 1.62 times less risky than Pilbara Minerals. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Pilbara Minerals Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Pilbara Minerals Limited on December 23, 2024 and sell it today you would lose (11.00) from holding Pilbara Minerals Limited or give up 8.27% of portfolio value over 90 days.

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

Glencore PLC ADR  vs.  Pilbara Minerals Limited

Glencore PLC ADR

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pilbara Minerals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Glencore PLC and Pilbara Minerals

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

The idea behind Glencore PLC ADR and Pilbara Minerals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.