Correlation Between South32 and Keweenaw Land

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

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

Diversification Opportunities for South32 and Keweenaw Land

0.07

Correlation Coefficient

South32  Keweenaw Land

Significant diversification

The 3 months correlation between South32 and Keweenaw is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Keweenaw Land Association in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keweenaw Land Association and South32 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 South32 Limited are associated (or correlated) with Keweenaw Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keweenaw Land Association has no effect on the direction of South32 i.e., South32 and Keweenaw Land go up and down completely randomly.

Pair Corralation between South32 and Keweenaw Land

Assuming the 90 days horizon South32 is expected to generate 2.45 times less return on investment than Keweenaw Land. But when comparing it to its historical volatility, South32 Limited is 1.16 times less risky than Keweenaw Land. It trades about 0.04 of its potential returns per unit of risk. Keweenaw Land Association is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,850  in Keweenaw Land Association on September 4, 2024 and sell it today you would earn a total of  1,900  from holding Keweenaw Land Association or generate 102.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.04%
Values	Daily Returns

South32 Limited  vs.  Keweenaw Land Association

South32 Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South32 Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, South32 reported solid returns over the last few months and may actually be approaching a breakup point.

Keweenaw Land Association

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keweenaw Land Association has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Keweenaw Land is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with South32 and Keweenaw Land

The main advantage of trading using opposite South32 and Keweenaw Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Keweenaw Land 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 Keweenaw Land will offset losses from the drop in Keweenaw Land's long position.

The idea behind South32 Limited and Keweenaw Land Association 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.