Correlation Between Green Technology and South32

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

By analyzing existing cross correlation between Green Technology Metals and South32 Limited, you can compare the effects of market volatilities on Green Technology 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 Green Technology with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Technology and South32.

Diversification Opportunities for Green Technology and South32

0.46

Correlation Coefficient

Green Technology  South32

Very weak diversification

The 3 months correlation between Green and South32 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Green Technology Metals and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and Green Technology 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 Green Technology Metals 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 Limited has no effect on the direction of Green Technology i.e., Green Technology and South32 go up and down completely randomly.

Pair Corralation between Green Technology and South32

Assuming the 90 days horizon Green Technology Metals is expected to generate 3.88 times more return on investment than South32. However, Green Technology is 3.88 times more volatile than South32 Limited. It trades about 0.16 of its potential returns per unit of risk. South32 Limited is currently generating about -0.11 per unit of risk. If you would invest  4.50  in Green Technology Metals on October 22, 2024 and sell it today you would earn a total of  1.00  from holding Green Technology Metals or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Green Technology Metals  vs.  South32 Limited

Green Technology Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Technology Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

South32 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South32 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Green Technology and South32

The main advantage of trading using opposite Green Technology and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Technology 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 Green Technology Metals and South32 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.