Correlation Between Glencore PLC and Australian Strategic

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

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

Diversification Opportunities for Glencore PLC and Australian Strategic

0.71

Correlation Coefficient

Glencore PLC  Australian Strategic

Poor diversification

The 3 months correlation between Glencore and Australian is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic 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 ADR are associated (or correlated) with Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Glencore PLC i.e., Glencore PLC and Australian Strategic go up and down completely randomly.

Pair Corralation between Glencore PLC and Australian Strategic

Assuming the 90 days horizon Glencore PLC ADR is expected to generate 0.38 times more return on investment than Australian Strategic. However, Glencore PLC ADR is 2.63 times less risky than Australian Strategic. It trades about -0.01 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.02 per unit of risk. If you would invest  1,213  in Glencore PLC ADR on September 14, 2024 and sell it today you would lose (234.00) from holding Glencore PLC ADR or give up 19.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Glencore PLC ADR  vs.  Australian Strategic Materials

Glencore PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Glencore PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Strategic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Australian Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Glencore PLC and Australian Strategic

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

The idea behind Glencore PLC ADR and Australian Strategic Materials 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.