Correlation Between Glencore PLC and Peak Resources

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

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

Diversification Opportunities for Glencore PLC and Peak Resources

0.27

Correlation Coefficient

Glencore PLC  Peak Resources

Modest diversification

The 3 months correlation between Glencore and Peak is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak Resources and Glencore PLC 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 Glencore PLC are associated (or correlated) with Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Glencore PLC i.e., Glencore PLC and Peak Resources go up and down completely randomly.

Pair Corralation between Glencore PLC and Peak Resources

Assuming the 90 days horizon Glencore PLC is expected to generate 0.23 times more return on investment than Peak Resources. However, Glencore PLC is 4.26 times less risky than Peak Resources. It trades about 0.02 of its potential returns per unit of risk. Peak Resources Limited is currently generating about -0.03 per unit of risk. If you would invest  455.00  in Glencore PLC on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Glencore PLC or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.85%
Values	Daily Returns

Glencore PLC  vs.  Peak Resources Limited

Glencore PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Glencore PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peak Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Glencore PLC and Peak Resources

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

The idea behind Glencore PLC and Peak Resources Limited 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.