Correlation Between South32 and Bear Creek
Can any of the company-specific risk be diversified away by investing in both South32 and Bear Creek 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 Bear Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Bear Creek Mining, you can compare the effects of market volatilities on South32 and Bear Creek 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 Bear Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Bear Creek.
Diversification Opportunities for South32 and Bear Creek
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between South32 and Bear is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Bear Creek Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bear Creek Mining 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 Bear Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bear Creek Mining has no effect on the direction of South32 i.e., South32 and Bear Creek go up and down completely randomly.
Pair Corralation between South32 and Bear Creek
Assuming the 90 days horizon South32 Limited is expected to generate 0.29 times more return on investment than Bear Creek. However, South32 Limited is 3.43 times less risky than Bear Creek. It trades about -0.1 of its potential returns per unit of risk. Bear Creek Mining is currently generating about -0.05 per unit of risk. If you would invest 240.00 in South32 Limited on September 3, 2024 and sell it today you would lose (13.00) from holding South32 Limited or give up 5.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
South32 Limited vs. Bear Creek Mining
Performance |
| Timeline |
| South32 Limited |
| Bear Creek Mining |
South32 and Bear Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Bear Creek
The main advantage of trading using opposite South32 and Bear Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Bear Creek 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 Bear Creek will offset losses from the drop in Bear Creek's long position.| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
| Bear Creek vs. Advantage Solutions | Bear Creek vs. Atlas Corp | Bear Creek vs. PureCycle Technologies | Bear Creek vs. WM Technology |
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 Stocks Directory module to find actively traded stocks across global markets.
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