Correlation Between South32 and KWG Resources
Can any of the company-specific risk be diversified away by investing in both South32 and KWG 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 KWG 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 KWG Resources, you can compare the effects of market volatilities on South32 and KWG 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 KWG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and KWG Resources.
Diversification Opportunities for South32 and KWG Resources
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between South32 and KWG is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and KWG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWG 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 KWG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWG Resources has no effect on the direction of South32 i.e., South32 and KWG Resources go up and down completely randomly.
Pair Corralation between South32 and KWG Resources
Assuming the 90 days horizon South32 Limited is expected to generate 0.14 times more return on investment than KWG Resources. However, South32 Limited is 6.99 times less risky than KWG Resources. It trades about 0.06 of its potential returns per unit of risk. KWG Resources is currently generating about -0.03 per unit of risk. If you would invest 210.00 in South32 Limited on December 1, 2024 and sell it today you would earn a total of 5.00 from holding South32 Limited or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
South32 Limited vs. KWG Resources
Performance |
| Timeline |
| South32 Limited |
| KWG Resources |
South32 and KWG Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and KWG Resources
The main advantage of trading using opposite South32 and KWG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, KWG 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 KWG Resources will offset losses from the drop in KWG Resources' long position.| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
| KWG Resources vs. Edison Cobalt Corp | KWG Resources vs. Champion Bear Resources | KWG Resources vs. Avarone Metals | KWG Resources vs. Adriatic Metals PLC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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