Correlation Between Glencore PLC and Piedmont Lithium
Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Piedmont Lithium 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 Piedmont Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glencore PLC and Piedmont Lithium Ltd, you can compare the effects of market volatilities on Glencore PLC and Piedmont Lithium 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 Piedmont Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Piedmont Lithium.
Diversification Opportunities for Glencore PLC and Piedmont Lithium
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Glencore and Piedmont is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Piedmont Lithium Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium 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 Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Glencore PLC i.e., Glencore PLC and Piedmont Lithium go up and down completely randomly.
Pair Corralation between Glencore PLC and Piedmont Lithium
Assuming the 90 days horizon Glencore PLC is expected to under-perform the Piedmont Lithium. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC is 4.65 times less risky than Piedmont Lithium. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Piedmont Lithium Ltd is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 913.00 in Piedmont Lithium Ltd on August 28, 2024 and sell it today you would earn a total of 406.00 from holding Piedmont Lithium Ltd or generate 44.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
Glencore PLC vs. Piedmont Lithium Ltd
Performance |
| Timeline |
| Glencore PLC |
| Piedmont Lithium |
Glencore PLC and Piedmont Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Piedmont Lithium
The main advantage of trading using opposite Glencore PLC and Piedmont Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, Piedmont Lithium 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 Piedmont Lithium will offset losses from the drop in Piedmont Lithium's long position.The idea behind Glencore PLC and Piedmont Lithium Ltd 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.| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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