Correlation Between Glencore PLC and Teck Resources

Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Teck Resources 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 Teck Resources 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 Teck Resources Ltd, you can compare the effects of market volatilities on Glencore PLC and Teck Resources 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 Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Teck Resources.

Diversification Opportunities for Glencore PLC and Teck Resources

0.4

Correlation Coefficient

Glencore PLC  Teck Resources

Very weak diversification

The 3 months correlation between Glencore and Teck is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Teck Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources 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 Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Glencore PLC i.e., Glencore PLC and Teck Resources go up and down completely randomly.

Pair Corralation between Glencore PLC and Teck Resources

Assuming the 90 days horizon Glencore PLC ADR is expected to under-perform the Teck Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC ADR is 1.17 times less risky than Teck Resources. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Teck Resources Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,102  in Teck Resources Ltd on December 26, 2024 and sell it today you would earn a total of  171.00  from holding Teck Resources Ltd or generate 4.17% return on investment over 90 days.

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

Glencore PLC ADR  vs.  Teck Resources Ltd

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 latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Teck Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Teck Resources is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Glencore PLC and Teck Resources

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

The idea behind Glencore PLC ADR and Teck Resources Ltd 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.