Correlation Between Glencore PLC and Centaurus Metals
Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Centaurus Metals 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 Centaurus Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glencore PLC and Centaurus Metals Limited, you can compare the effects of market volatilities on Glencore PLC and Centaurus Metals 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 Centaurus Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Centaurus Metals.
Diversification Opportunities for Glencore PLC and Centaurus Metals
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Glencore and Centaurus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Centaurus Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals 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 are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of Glencore PLC i.e., Glencore PLC and Centaurus Metals go up and down completely randomly.
Pair Corralation between Glencore PLC and Centaurus Metals
Assuming the 90 days horizon Glencore PLC is expected to generate 0.42 times more return on investment than Centaurus Metals. However, Glencore PLC is 2.4 times less risky than Centaurus Metals. It trades about -0.14 of its potential returns per unit of risk. Centaurus Metals Limited is currently generating about -0.06 per unit of risk. If you would invest 525.00 in Glencore PLC on August 28, 2024 and sell it today you would lose (36.00) from holding Glencore PLC or give up 6.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Glencore PLC vs. Centaurus Metals Limited
Performance |
| Timeline |
| Glencore PLC |
| Centaurus Metals |
Glencore PLC and Centaurus Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Centaurus Metals
The main advantage of trading using opposite Glencore PLC and Centaurus Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, Centaurus Metals 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 Centaurus Metals will offset losses from the drop in Centaurus Metals' long position.The idea behind Glencore PLC and Centaurus Metals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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