Correlation Between Glencore PLC and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Fortescue 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 Fortescue 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 Fortescue Metals Group, you can compare the effects of market volatilities on Glencore PLC and Fortescue 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 Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Fortescue Metals.
Diversification Opportunities for Glencore PLC and Fortescue Metals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Glencore and Fortescue is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Glencore PLC i.e., Glencore PLC and Fortescue Metals go up and down completely randomly.
Pair Corralation between Glencore PLC and Fortescue Metals
Assuming the 90 days horizon Glencore PLC is expected to under-perform the Fortescue Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC is 1.09 times less risky than Fortescue Metals. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Fortescue Metals Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,254 in Fortescue Metals Group on September 1, 2024 and sell it today you would lose (34.00) from holding Fortescue Metals Group or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Glencore PLC vs. Fortescue Metals Group
Performance |
| Timeline |
| Glencore PLC |
| Fortescue Metals |
Glencore PLC and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Fortescue Metals
The main advantage of trading using opposite Glencore PLC and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, Fortescue 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Glencore PLC vs. Anglo American PLC | Glencore PLC vs. Teck Resources Ltd | Glencore PLC vs. BHP Group Limited | Glencore PLC vs. Vale SA ADR |
| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. Nickel Mines Limited | Fortescue Metals vs. Mineral Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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