Correlation Between South32 ADR and Industrias Penoles

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

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

Diversification Opportunities for South32 ADR and Industrias Penoles

0.7

Correlation Coefficient

South32 ADR  Industrias Penoles

Poor diversification

The 3 months correlation between South32 and Industrias is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding South32 ADR and Industrias Penoles Sab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Penoles Sab and South32 ADR 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 ADR are associated (or correlated) with Industrias Penoles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Penoles Sab has no effect on the direction of South32 ADR i.e., South32 ADR and Industrias Penoles go up and down completely randomly.

Pair Corralation between South32 ADR and Industrias Penoles

Assuming the 90 days horizon South32 ADR is expected to generate 0.47 times more return on investment than Industrias Penoles. However, South32 ADR is 2.12 times less risky than Industrias Penoles. It trades about 0.12 of its potential returns per unit of risk. Industrias Penoles Sab is currently generating about 0.05 per unit of risk. If you would invest  1,026  in South32 ADR on September 2, 2024 and sell it today you would earn a total of  185.00  from holding South32 ADR or generate 18.03% return on investment over 90 days.

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

South32 ADR  vs.  Industrias Penoles Sab

South32 ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South32 ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, South32 ADR showed solid returns over the last few months and may actually be approaching a breakup point.

Industrias Penoles Sab

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Penoles Sab are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrias Penoles reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South32 ADR and Industrias Penoles

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

The idea behind South32 ADR and Industrias Penoles Sab 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.

Check out your portfolio center.

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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.