Correlation Between Nexa Resources and Teck Resources

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

By analyzing existing cross correlation between Nexa Resources SA and Teck Resources Ltd, you can compare the effects of market volatilities on Nexa Resources 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 Nexa Resources with a short position of Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexa Resources and Teck Resources.

Diversification Opportunities for Nexa Resources and Teck Resources

0.42

Correlation Coefficient

Nexa Resources  Teck Resources

Very weak diversification

The 3 months correlation between Nexa and Teck is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nexa Resources SA and Teck Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources and Nexa Resources 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 Nexa Resources SA 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 Nexa Resources i.e., Nexa Resources and Teck Resources go up and down completely randomly.

Pair Corralation between Nexa Resources and Teck Resources

Given the investment horizon of 90 days Nexa Resources SA is expected to generate 0.94 times more return on investment than Teck Resources. However, Nexa Resources SA is 1.06 times less risky than Teck Resources. It trades about 0.19 of its potential returns per unit of risk. Teck Resources Ltd is currently generating about 0.03 per unit of risk. If you would invest  598.00  in Nexa Resources SA on September 4, 2024 and sell it today you would earn a total of  161.00  from holding Nexa Resources SA or generate 26.92% return on investment over 90 days.

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

Nexa Resources SA  vs.  Teck Resources Ltd

Nexa Resources SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nexa Resources SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Nexa Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Teck Resources

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Ltd are ranked lower than 2 (%) 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 Nexa Resources and Teck Resources

The main advantage of trading using opposite Nexa Resources and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexa Resources 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 Nexa Resources SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.