Correlation Between Glencore PLC and IGO

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

Diversification Opportunities for Glencore PLC and IGO

0.7

Correlation Coefficient

Glencore PLC  IGO

Poor diversification

The 3 months correlation between Glencore and IGO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited 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 IGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGO Limited has no effect on the direction of Glencore PLC i.e., Glencore PLC and IGO go up and down completely randomly.

Pair Corralation between Glencore PLC and IGO

Assuming the 90 days horizon Glencore PLC ADR is expected to generate 0.94 times more return on investment than IGO. However, Glencore PLC ADR is 1.06 times less risky than IGO. It trades about 0.01 of its potential returns per unit of risk. IGO Limited is currently generating about -0.09 per unit of risk. If you would invest  976.00  in Glencore PLC ADR on September 12, 2024 and sell it today you would earn a total of  3.00  from holding Glencore PLC ADR or generate 0.31% return on investment over 90 days.

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

Glencore PLC ADR  vs.  IGO Limited

Glencore PLC ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

IGO Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IGO Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Glencore PLC and IGO

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

The idea behind Glencore PLC ADR and IGO 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.

Check out your portfolio center.

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.