Correlation Between Glencore PLC and Atacama Resources

Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Atacama 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 Atacama 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 Atacama Resources International, you can compare the effects of market volatilities on Glencore PLC and Atacama 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 Atacama Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Atacama Resources.

Diversification Opportunities for Glencore PLC and Atacama Resources

-0.35

Correlation Coefficient

Glencore PLC  Atacama Resources

Very good diversification

The 3 months correlation between Glencore and Atacama is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Atacama Resources Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atacama 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 Atacama Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atacama Resources has no effect on the direction of Glencore PLC i.e., Glencore PLC and Atacama Resources go up and down completely randomly.

Pair Corralation between Glencore PLC and Atacama Resources

Assuming the 90 days horizon Glencore PLC is expected to under-perform the Atacama Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC is 12.29 times less risky than Atacama Resources. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Atacama Resources International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.17  in Atacama Resources International on September 16, 2024 and sell it today you would earn a total of  0.23  from holding Atacama Resources International or generate 135.29% return on investment over 90 days.

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

Glencore PLC  vs.  Atacama Resources Internationa

Glencore PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Atacama Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atacama Resources International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Atacama Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glencore PLC and Atacama Resources

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

The idea behind Glencore PLC and Atacama Resources International 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.