Correlation Between South32 and Regulus Resources

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

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

Diversification Opportunities for South32 and Regulus Resources

-0.51

Correlation Coefficient

South32  Regulus Resources

Excellent diversification

The 3 months correlation between South32 and Regulus is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Regulus Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regulus Resources 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 Regulus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regulus Resources has no effect on the direction of South32 i.e., South32 and Regulus Resources go up and down completely randomly.

Pair Corralation between South32 and Regulus Resources

Assuming the 90 days horizon South32 Limited is expected to under-perform the Regulus Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, South32 Limited is 1.03 times less risky than Regulus Resources. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Regulus Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Regulus Resources on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Regulus Resources or generate 16.54% return on investment over 90 days.

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

South32 Limited  vs.  Regulus Resources

South32 Limited

Risk-Adjusted Performance

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.

Regulus Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regulus Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regulus Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South32 and Regulus Resources

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

The idea behind South32 Limited and Regulus Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.