Correlation Between Glencore PLC and JSE
Can any of the company-specific risk be diversified away by investing in both Glencore PLC and JSE 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 JSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glencore PLC and JSE Limited, you can compare the effects of market volatilities on Glencore PLC and JSE 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 JSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and JSE.
Diversification Opportunities for Glencore PLC and JSE
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Glencore and JSE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited 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 JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of Glencore PLC i.e., Glencore PLC and JSE go up and down completely randomly.
Pair Corralation between Glencore PLC and JSE
Assuming the 90 days trading horizon Glencore PLC is expected to under-perform the JSE. In addition to that, Glencore PLC is 1.47 times more volatile than JSE Limited. It trades about -0.17 of its total potential returns per unit of risk. JSE Limited is currently generating about -0.2 per unit of volatility. If you would invest 1,249,400 in JSE Limited on August 30, 2024 and sell it today you would lose (69,400) from holding JSE Limited or give up 5.55% 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. JSE Limited
Performance |
| Timeline |
| Glencore PLC |
| JSE Limited |
Glencore PLC and JSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and JSE
The main advantage of trading using opposite Glencore PLC and JSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, JSE 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 JSE will offset losses from the drop in JSE's long position.The idea behind Glencore PLC and JSE 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.| JSE vs. British American Tobacco | JSE vs. Anglo American PLC | JSE vs. Anglo American Platinum | JSE vs. ABSA Bank 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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