Correlation Between Critical Elements and South32 ADR
Can any of the company-specific risk be diversified away by investing in both Critical Elements and South32 ADR 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 Critical Elements and South32 ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Critical Elements and South32 ADR, you can compare the effects of market volatilities on Critical Elements and South32 ADR 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 Critical Elements with a short position of South32 ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and South32 ADR.
Diversification Opportunities for Critical Elements and South32 ADR
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Critical and South32 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and South32 ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 ADR and Critical Elements 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 Critical Elements are associated (or correlated) with South32 ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 ADR has no effect on the direction of Critical Elements i.e., Critical Elements and South32 ADR go up and down completely randomly.
Pair Corralation between Critical Elements and South32 ADR
Assuming the 90 days horizon Critical Elements is expected to under-perform the South32 ADR. In addition to that, Critical Elements is 2.03 times more volatile than South32 ADR. It trades about -0.1 of its total potential returns per unit of risk. South32 ADR is currently generating about -0.01 per unit of volatility. If you would invest 1,303 in South32 ADR on September 1, 2024 and sell it today you would lose (87.00) from holding South32 ADR or give up 6.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Critical Elements vs. South32 ADR
Performance |
| Timeline |
| Critical Elements |
| South32 ADR |
Critical Elements and South32 ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Critical Elements and South32 ADR
The main advantage of trading using opposite Critical Elements and South32 ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Elements position performs unexpectedly, South32 ADR 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 South32 ADR will offset losses from the drop in South32 ADR's long position.| Critical Elements vs. Argosy Minerals Limited | Critical Elements vs. Aurelia Metals Limited | Critical Elements vs. Artemis Resources | Critical Elements vs. Ascendant Resources |
| South32 ADR vs. Liontown Resources Limited | South32 ADR vs. IGO Limited | South32 ADR vs. Anglo American PLC | South32 ADR vs. IGO Limited |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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