Correlation Between South32 and Searchlight Minerals
Can any of the company-specific risk be diversified away by investing in both South32 and Searchlight Minerals 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 Searchlight Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Searchlight Minerals Corp, you can compare the effects of market volatilities on South32 and Searchlight Minerals 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 Searchlight Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Searchlight Minerals.
Diversification Opportunities for South32 and Searchlight Minerals
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between South32 and Searchlight is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Searchlight Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Searchlight Minerals Corp 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 Searchlight Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Searchlight Minerals Corp has no effect on the direction of South32 i.e., South32 and Searchlight Minerals go up and down completely randomly.
Pair Corralation between South32 and Searchlight Minerals
Assuming the 90 days horizon South32 is expected to generate 37.49 times less return on investment than Searchlight Minerals. But when comparing it to its historical volatility, South32 Limited is 6.23 times less risky than Searchlight Minerals. It trades about 0.02 of its potential returns per unit of risk. Searchlight Minerals Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.42 in Searchlight Minerals Corp on September 2, 2024 and sell it today you would lose (0.19) from holding Searchlight Minerals Corp or give up 45.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.04% |
| Values | Daily Returns |
South32 Limited vs. Searchlight Minerals Corp
Performance |
| Timeline |
| South32 Limited |
| Searchlight Minerals Corp |
South32 and Searchlight Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Searchlight Minerals
The main advantage of trading using opposite South32 and Searchlight Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Searchlight Minerals 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 Searchlight Minerals will offset losses from the drop in Searchlight Minerals' long position.The idea behind South32 Limited and Searchlight Minerals Corp 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.| Searchlight Minerals vs. Sun Summit Minerals | Searchlight Minerals vs. Pampa Metals | Searchlight Minerals vs. Progressive Planet Solutions | Searchlight Minerals vs. Posera |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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