Correlation Between South32 and Amerigo Resources
Can any of the company-specific risk be diversified away by investing in both South32 and Amerigo Resources 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 Amerigo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Amerigo Resources, you can compare the effects of market volatilities on South32 and Amerigo Resources 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 Amerigo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Amerigo Resources.
Diversification Opportunities for South32 and Amerigo Resources
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between South32 and Amerigo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Amerigo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amerigo Resources 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 Limited are associated (or correlated) with Amerigo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amerigo Resources has no effect on the direction of South32 i.e., South32 and Amerigo Resources go up and down completely randomly.
Pair Corralation between South32 and Amerigo Resources
Assuming the 90 days horizon South32 Limited is expected to generate 1.42 times more return on investment than Amerigo Resources. However, South32 is 1.42 times more volatile than Amerigo Resources. It trades about 0.09 of its potential returns per unit of risk. Amerigo Resources is currently generating about 0.05 per unit of risk. If you would invest 195.00 in South32 Limited on September 2, 2024 and sell it today you would earn a total of 32.00 from holding South32 Limited or generate 16.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
South32 Limited vs. Amerigo Resources
Performance |
| Timeline |
| South32 Limited |
| Amerigo Resources |
South32 and Amerigo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Amerigo Resources
The main advantage of trading using opposite South32 and Amerigo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Amerigo Resources 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 Amerigo Resources will offset losses from the drop in Amerigo Resources' long position.The idea behind South32 Limited and Amerigo Resources 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.| Amerigo Resources vs. South32 Limited | Amerigo Resources vs. NioCorp Developments Ltd | Amerigo Resources vs. HUMANA INC | Amerigo Resources vs. SCOR PK |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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