Correlation Between South32 and Nexa Resources
Can any of the company-specific risk be diversified away by investing in both South32 and Nexa 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 Nexa 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 Nexa Resources SA, you can compare the effects of market volatilities on South32 and Nexa 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 Nexa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Nexa Resources.
Diversification Opportunities for South32 and Nexa Resources
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between South32 and Nexa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Nexa Resources SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexa Resources SA 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 Nexa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexa Resources SA has no effect on the direction of South32 i.e., South32 and Nexa Resources go up and down completely randomly.
Pair Corralation between South32 and Nexa Resources
Assuming the 90 days horizon South32 is expected to generate 1.63 times less return on investment than Nexa Resources. In addition to that, South32 is 1.78 times more volatile than Nexa Resources SA. It trades about 0.02 of its total potential returns per unit of risk. Nexa Resources SA is currently generating about 0.04 per unit of volatility. If you would invest 571.00 in Nexa Resources SA on August 26, 2024 and sell it today you would earn a total of 189.00 from holding Nexa Resources SA or generate 33.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 74.87% |
| Values | Daily Returns |
South32 Limited vs. Nexa Resources SA
Performance |
| Timeline |
| South32 Limited |
| Nexa Resources SA |
South32 and Nexa Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Nexa Resources
The main advantage of trading using opposite South32 and Nexa Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Nexa 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 Nexa Resources will offset losses from the drop in Nexa Resources' long position.| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
| Nexa Resources vs. Materion | Nexa Resources vs. Fury Gold Mines | Nexa Resources vs. Eskay Mining Corp | Nexa Resources vs. EMX Royalty Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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