Correlation Between South32 and South32 ADR
Can any of the company-specific risk be diversified away by investing in both South32 and South32 ADR 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 South32 ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and South32 ADR, you can compare the effects of market volatilities on South32 and South32 ADR 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 South32 ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and South32 ADR.
Diversification Opportunities for South32 and South32 ADR
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between South32 and South32 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and South32 ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 ADR 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 South32 ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 ADR has no effect on the direction of South32 i.e., South32 and South32 ADR go up and down completely randomly.
Pair Corralation between South32 and South32 ADR
Assuming the 90 days horizon South32 Limited is expected to generate 1.73 times more return on investment than South32 ADR. However, South32 is 1.73 times more volatile than South32 ADR. It trades about 0.02 of its potential returns per unit of risk. South32 ADR is currently generating about 0.0 per unit of risk. If you would invest 257.00 in South32 Limited on August 26, 2024 and sell it today you would lose (11.00) from holding South32 Limited or give up 4.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 74.87% |
| Values | Daily Returns |
South32 Limited vs. South32 ADR
Performance |
| Timeline |
| South32 Limited |
| South32 ADR |
South32 and South32 ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and South32 ADR
The main advantage of trading using opposite South32 and South32 ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, South32 ADR 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 South32 ADR will offset losses from the drop in South32 ADR's long position.| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
| South32 ADR vs. Liontown Resources Limited | South32 ADR vs. IGO Limited | South32 ADR vs. Anglo American PLC | South32 ADR vs. IGO Limited |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |