Correlation Between Sumitomo Metal and Glencore PLC
Can any of the company-specific risk be diversified away by investing in both Sumitomo Metal and Glencore PLC 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 Sumitomo Metal and Glencore PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Metal Mining and Glencore PLC ADR, you can compare the effects of market volatilities on Sumitomo Metal and Glencore PLC 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 Sumitomo Metal with a short position of Glencore PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Metal and Glencore PLC.
Diversification Opportunities for Sumitomo Metal and Glencore PLC
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sumitomo and Glencore is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Metal Mining and Glencore PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC ADR and Sumitomo Metal 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 Sumitomo Metal Mining are associated (or correlated) with Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC ADR has no effect on the direction of Sumitomo Metal i.e., Sumitomo Metal and Glencore PLC go up and down completely randomly.
Pair Corralation between Sumitomo Metal and Glencore PLC
Assuming the 90 days horizon Sumitomo Metal Mining is expected to under-perform the Glencore PLC. In addition to that, Sumitomo Metal is 1.22 times more volatile than Glencore PLC ADR. It trades about -0.08 of its total potential returns per unit of risk. Glencore PLC ADR is currently generating about -0.08 per unit of volatility. If you would invest 1,213 in Glencore PLC ADR on August 29, 2024 and sell it today you would lose (239.00) from holding Glencore PLC ADR or give up 19.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Metal Mining vs. Glencore PLC ADR
Performance |
| Timeline |
| Sumitomo Metal Mining |
| Glencore PLC ADR |
Sumitomo Metal and Glencore PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Metal and Glencore PLC
The main advantage of trading using opposite Sumitomo Metal and Glencore PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Metal position performs unexpectedly, Glencore PLC 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 Glencore PLC will offset losses from the drop in Glencore PLC's long position.| Sumitomo Metal vs. Rockridge Resources | Sumitomo Metal vs. Ameriwest Lithium | Sumitomo Metal vs. Osisko Metals Incorporated | Sumitomo Metal vs. Volt Lithium Corp |
| Glencore PLC vs. Rockridge Resources | Glencore PLC vs. Ameriwest Lithium | Glencore PLC vs. Osisko Metals Incorporated | Glencore PLC vs. Volt Lithium 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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