Correlation Between South32 and Mineral Res

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

By analyzing existing cross correlation between South32 Limited and Mineral Res, you can compare the effects of market volatilities on South32 and Mineral Res 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 Mineral Res. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Mineral Res.

Diversification Opportunities for South32 and Mineral Res

0.46

Correlation Coefficient

South32  Mineral Res

Very weak diversification

The 3 months correlation between South32 and Mineral is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Mineral Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Res 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 Mineral Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Res has no effect on the direction of South32 i.e., South32 and Mineral Res go up and down completely randomly.

Pair Corralation between South32 and Mineral Res

Assuming the 90 days horizon South32 Limited is expected to generate 0.99 times more return on investment than Mineral Res. However, South32 Limited is 1.01 times less risky than Mineral Res. It trades about 0.02 of its potential returns per unit of risk. Mineral Res is currently generating about -0.06 per unit of risk. If you would invest  221.00  in South32 Limited on October 7, 2024 and sell it today you would lose (6.00) from holding South32 Limited or give up 2.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.53%
Values	Daily Returns

South32 Limited  vs.  Mineral Res

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 nearly stable essential indicators, South32 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with South32 and Mineral Res

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

The idea behind South32 Limited and Mineral Res 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.