Correlation Between South32 and Materion

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

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

Diversification Opportunities for South32 and Materion

0.17

Correlation Coefficient

South32  Materion

Average diversification

The 3 months correlation between South32 and Materion is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Materion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materion 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 Materion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materion has no effect on the direction of South32 i.e., South32 and Materion go up and down completely randomly.

Pair Corralation between South32 and Materion

Assuming the 90 days horizon South32 Limited is expected to generate 1.42 times more return on investment than Materion. However, South32 is 1.42 times more volatile than Materion. It trades about 0.09 of its potential returns per unit of risk. Materion is currently generating about 0.07 per unit of risk. If you would invest  184.00  in South32 Limited on September 12, 2024 and sell it today you would earn a total of  37.00  from holding South32 Limited or generate 20.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

South32 Limited  vs.  Materion

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.

Materion

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Materion are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Materion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with South32 and Materion

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

The idea behind South32 Limited and Materion 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.