Correlation Between Leading Edge and South32
Can any of the company-specific risk be diversified away by investing in both Leading Edge and South32 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 Leading Edge and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and South32 Limited, you can compare the effects of market volatilities on Leading Edge and South32 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 Leading Edge with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and South32.
Diversification Opportunities for Leading Edge and South32
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leading and South32 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and Leading Edge 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 Leading Edge Materials are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Leading Edge i.e., Leading Edge and South32 go up and down completely randomly.
Pair Corralation between Leading Edge and South32
Assuming the 90 days horizon Leading Edge Materials is expected to generate 1.97 times more return on investment than South32. However, Leading Edge is 1.97 times more volatile than South32 Limited. It trades about 0.03 of its potential returns per unit of risk. South32 Limited is currently generating about 0.02 per unit of risk. If you would invest 7.50 in Leading Edge Materials on September 3, 2024 and sell it today you would lose (0.80) from holding Leading Edge Materials or give up 10.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.32% |
| Values | Daily Returns |
Leading Edge Materials vs. South32 Limited
Performance |
| Timeline |
| Leading Edge Materials |
| South32 Limited |
Leading Edge and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and South32
The main advantage of trading using opposite Leading Edge and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Leading Edge vs. Grid Metals Corp | Leading Edge vs. Fireweed Zinc | Leading Edge vs. First American Silver | Leading Edge vs. Australian Strategic Materials |
| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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