Correlation Between South32 ADR and South32
Can any of the company-specific risk be diversified away by investing in both South32 ADR and South32 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 ADR and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 ADR and South32 Limited, you can compare the effects of market volatilities on South32 ADR and South32 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 ADR with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 ADR and South32.
Diversification Opportunities for South32 ADR and South32
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 ADR and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and South32 ADR 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 ADR are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of South32 ADR i.e., South32 ADR and South32 go up and down completely randomly.
Pair Corralation between South32 ADR and South32
Assuming the 90 days horizon South32 ADR is expected to generate 1.02 times less return on investment than South32. In addition to that, South32 ADR is 1.67 times more volatile than South32 Limited. It trades about 0.05 of its total potential returns per unit of risk. South32 Limited is currently generating about 0.08 per unit of volatility. If you would invest 240.00 in South32 Limited on August 26, 2024 and sell it today you would earn a total of 6.00 from holding South32 Limited or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
South32 ADR vs. South32 Limited
Performance |
| Timeline |
| South32 ADR |
| South32 Limited |
South32 ADR and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 ADR and South32
The main advantage of trading using opposite South32 ADR and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 ADR position performs unexpectedly, South32 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 will offset losses from the drop in South32's long position.| South32 ADR vs. Liontown Resources Limited | South32 ADR vs. IGO Limited | South32 ADR vs. Anglo American PLC | South32 ADR vs. IGO Limited |
| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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