Correlation Between Allkem and Glencore PLC

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

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

Diversification Opportunities for Allkem and Glencore PLC

-0.17

Correlation Coefficient

Allkem  Glencore PLC

Good diversification

The 3 months correlation between Allkem and Glencore is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Allkem and Glencore PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC ADR and Allkem 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 Allkem are associated (or correlated) with Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC ADR has no effect on the direction of Allkem i.e., Allkem and Glencore PLC go up and down completely randomly.

Pair Corralation between Allkem and Glencore PLC

If you would invest  976.00  in Glencore PLC ADR on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Glencore PLC ADR or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Allkem  vs.  Glencore PLC ADR

Allkem

Risk-Adjusted Performance

0 of 100

Very Weak

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

Glencore PLC ADR

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Allkem and Glencore PLC

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

The idea behind Allkem and Glencore PLC ADR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.