Correlation Between Glencore PLC and Nouveau Monde
Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Nouveau Monde 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 Nouveau Monde into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glencore PLC ADR and Nouveau Monde Graphite, you can compare the effects of market volatilities on Glencore PLC and Nouveau Monde 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 Nouveau Monde. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Nouveau Monde.
Diversification Opportunities for Glencore PLC and Nouveau Monde
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Glencore and Nouveau is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Nouveau Monde Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nouveau Monde Graphite 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 ADR are associated (or correlated) with Nouveau Monde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nouveau Monde Graphite has no effect on the direction of Glencore PLC i.e., Glencore PLC and Nouveau Monde go up and down completely randomly.
Pair Corralation between Glencore PLC and Nouveau Monde
Assuming the 90 days horizon Glencore PLC ADR is expected to generate 1.13 times more return on investment than Nouveau Monde. However, Glencore PLC is 1.13 times more volatile than Nouveau Monde Graphite. It trades about -0.16 of its potential returns per unit of risk. Nouveau Monde Graphite is currently generating about -0.27 per unit of risk. If you would invest 1,044 in Glencore PLC ADR on September 1, 2024 and sell it today you would lose (84.00) from holding Glencore PLC ADR or give up 8.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Glencore PLC ADR vs. Nouveau Monde Graphite
Performance |
| Timeline |
| Glencore PLC ADR |
| Nouveau Monde Graphite |
Glencore PLC and Nouveau Monde Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Nouveau Monde
The main advantage of trading using opposite Glencore PLC and Nouveau Monde positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, Nouveau Monde 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 Nouveau Monde will offset losses from the drop in Nouveau Monde's long position.| Glencore PLC vs. ATT Inc | Glencore PLC vs. Merck Company | Glencore PLC vs. Walt Disney | Glencore PLC vs. Caterpillar |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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