Correlation Between South32 and Centaurus Metals
Can any of the company-specific risk be diversified away by investing in both South32 and Centaurus 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 South32 and Centaurus Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 and Centaurus Metals, you can compare the effects of market volatilities on South32 and Centaurus 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 South32 with a short position of Centaurus Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Centaurus Metals.
Diversification Opportunities for South32 and Centaurus Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between South32 and Centaurus is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding South32 and Centaurus Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and South32 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 South32 are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of South32 i.e., South32 and Centaurus Metals go up and down completely randomly.
Pair Corralation between South32 and Centaurus Metals
Assuming the 90 days trading horizon South32 is expected to generate 0.62 times more return on investment than Centaurus Metals. However, South32 is 1.61 times less risky than Centaurus Metals. It trades about -0.06 of its potential returns per unit of risk. Centaurus Metals is currently generating about -0.08 per unit of risk. If you would invest 373.00 in South32 on September 4, 2024 and sell it today you would lose (11.00) from holding South32 or give up 2.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
South32 vs. Centaurus Metals
Performance |
| Timeline |
| South32 |
| Centaurus Metals |
South32 and Centaurus Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Centaurus Metals
The main advantage of trading using opposite South32 and Centaurus Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Centaurus 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 Centaurus Metals will offset losses from the drop in Centaurus Metals' long position.| South32 vs. Centaurus Metals | South32 vs. Retail Food Group | South32 vs. Super Retail Group | South32 vs. Dexus Convenience Retail |
| Centaurus Metals vs. Northern Star Resources | Centaurus Metals vs. Evolution Mining | Centaurus Metals vs. Bluescope Steel | Centaurus Metals vs. Sandfire Resources NL |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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