Correlation Between Globex Mining and Chemtrade Logistics

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

By analyzing existing cross correlation between Globex Mining Enterprises and Chemtrade Logistics Income, you can compare the effects of market volatilities on Globex Mining and Chemtrade Logistics 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 Globex Mining with a short position of Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globex Mining and Chemtrade Logistics.

Diversification Opportunities for Globex Mining and Chemtrade Logistics

0.52

Correlation Coefficient

Globex Mining  Chemtrade Logistics

Very weak diversification

The 3 months correlation between Globex and Chemtrade is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and Globex Mining 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 Globex Mining Enterprises are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Globex Mining i.e., Globex Mining and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Globex Mining and Chemtrade Logistics

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 2.01 times more return on investment than Chemtrade Logistics. However, Globex Mining is 2.01 times more volatile than Chemtrade Logistics Income. It trades about 0.2 of its potential returns per unit of risk. Chemtrade Logistics Income is currently generating about 0.04 per unit of risk. If you would invest  85.00  in Globex Mining Enterprises on September 24, 2024 and sell it today you would earn a total of  30.00  from holding Globex Mining Enterprises or generate 35.29% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  Chemtrade Logistics Income

Globex Mining Enterprises

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Chemtrade Logistics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Globex Mining and Chemtrade Logistics

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

The idea behind Globex Mining Enterprises and Chemtrade Logistics Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.