Correlation Between Globex Mining and South Pacific

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

By analyzing existing cross correlation between Globex Mining Enterprises and South Pacific Metals, you can compare the effects of market volatilities on Globex Mining and South Pacific 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 Globex Mining with a short position of South Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globex Mining and South Pacific.

Diversification Opportunities for Globex Mining and South Pacific

0.1

Correlation Coefficient

Globex Mining  South Pacific

Average diversification

The 3 months correlation between Globex and South is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific Metals and Globex Mining 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 Globex Mining Enterprises are associated (or correlated) with South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Globex Mining i.e., Globex Mining and South Pacific go up and down completely randomly.

Pair Corralation between Globex Mining and South Pacific

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 0.67 times more return on investment than South Pacific. However, Globex Mining Enterprises is 1.49 times less risky than South Pacific. It trades about 0.19 of its potential returns per unit of risk. South Pacific Metals is currently generating about 0.06 per unit of risk. If you would invest  117.00  in Globex Mining Enterprises on December 21, 2024 and sell it today you would earn a total of  42.00  from holding Globex Mining Enterprises or generate 35.9% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  South Pacific Metals

Globex Mining Enterprises

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

South Pacific Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in South Pacific Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, South Pacific showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Globex Mining and South Pacific

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

The idea behind Globex Mining Enterprises and South Pacific Metals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.