Correlation Between Glencore PLC and Firstrand

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

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

Diversification Opportunities for Glencore PLC and Firstrand

0.29

Correlation Coefficient

Glencore PLC  Firstrand

Modest diversification

The 3 months correlation between Glencore and Firstrand is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Firstrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firstrand 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 Firstrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firstrand has no effect on the direction of Glencore PLC i.e., Glencore PLC and Firstrand go up and down completely randomly.

Pair Corralation between Glencore PLC and Firstrand

Assuming the 90 days trading horizon Glencore PLC is expected to under-perform the Firstrand. In addition to that, Glencore PLC is 1.41 times more volatile than Firstrand. It trades about -0.03 of its total potential returns per unit of risk. Firstrand is currently generating about 0.01 per unit of volatility. If you would invest  808,217  in Firstrand on September 17, 2024 and sell it today you would earn a total of  5,683  from holding Firstrand or generate 0.7% return on investment over 90 days.

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

Glencore PLC  vs.  Firstrand

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. In spite of rather sound technical and fundamental indicators, Glencore PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Firstrand

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Firstrand are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Firstrand is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Glencore PLC and Firstrand

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

The idea behind Glencore PLC and Firstrand 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.