Correlation Between Teck Resources and HudBay Minerals

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

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

Diversification Opportunities for Teck Resources and HudBay Minerals

0.69

Correlation Coefficient

Teck Resources  HudBay Minerals

Poor diversification

The 3 months correlation between Teck and HudBay is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and HudBay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HudBay Minerals and Teck Resources 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 Teck Resources Ltd are associated (or correlated) with HudBay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HudBay Minerals has no effect on the direction of Teck Resources i.e., Teck Resources and HudBay Minerals go up and down completely randomly.

Pair Corralation between Teck Resources and HudBay Minerals

Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 0.66 times more return on investment than HudBay Minerals. However, Teck Resources Ltd is 1.51 times less risky than HudBay Minerals. It trades about 0.04 of its potential returns per unit of risk. HudBay Minerals is currently generating about 0.03 per unit of risk. If you would invest  4,102  in Teck Resources Ltd on December 26, 2024 and sell it today you would earn a total of  171.00  from holding Teck Resources Ltd or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Teck Resources Ltd  vs.  HudBay Minerals

Teck Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Teck Resources is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

HudBay Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HudBay Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, HudBay Minerals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teck Resources and HudBay Minerals

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

The idea behind Teck Resources Ltd and HudBay Minerals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.