Correlation Between South32 and Globex Mining

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Can any of the company-specific risk be diversified away by investing in both South32 and Globex Mining 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 Globex Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Globex Mining Enterprises, you can compare the effects of market volatilities on South32 and Globex Mining 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 Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Globex Mining.

Diversification Opportunities for South32 and Globex Mining

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between South32 and Globex is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of South32 i.e., South32 and Globex Mining go up and down completely randomly.

Pair Corralation between South32 and Globex Mining

Assuming the 90 days horizon South32 Limited is expected to under-perform the Globex Mining. In addition to that, South32 is 1.31 times more volatile than Globex Mining Enterprises. It trades about -0.1 of its total potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.12 per unit of volatility. If you would invest  74.00  in Globex Mining Enterprises on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Globex Mining Enterprises or generate 4.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

South32 Limited  vs.  Globex Mining Enterprises

 Performance 
       Timeline  
South32 Limited 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in South32 Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, South32 reported solid returns over the last few months and may actually be approaching a breakup point.
Globex Mining Enterprises 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Globex Mining reported solid returns over the last few months and may actually be approaching a breakup point.

South32 and Globex Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with South32 and Globex Mining

The main advantage of trading using opposite South32 and Globex Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Globex Mining 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 Globex Mining will offset losses from the drop in Globex Mining's long position.
The idea behind South32 Limited and Globex Mining Enterprises 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.
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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