Correlation Between Teck Resources and Compass Minerals
Can any of the company-specific risk be diversified away by investing in both Teck Resources and Compass 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 Teck Resources and Compass Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teck Resources Ltd and Compass Minerals International, you can compare the effects of market volatilities on Teck Resources and Compass 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 Teck Resources with a short position of Compass Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Compass Minerals.
Diversification Opportunities for Teck Resources and Compass Minerals
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Teck and Compass is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int and Teck Resources 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 Teck Resources Ltd are associated (or correlated) with Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Teck Resources i.e., Teck Resources and Compass Minerals go up and down completely randomly.
Pair Corralation between Teck Resources and Compass Minerals
Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 0.65 times more return on investment than Compass Minerals. However, Teck Resources Ltd is 1.54 times less risky than Compass Minerals. It trades about 0.02 of its potential returns per unit of risk. Compass Minerals International is currently generating about -0.03 per unit of risk. If you would invest 4,336 in Teck Resources Ltd on August 29, 2024 and sell it today you would earn a total of 294.00 from holding Teck Resources Ltd or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Ltd vs. Compass Minerals International
Performance |
| Timeline |
| Teck Resources |
| Compass Minerals Int |
Teck Resources and Compass Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Compass Minerals
The main advantage of trading using opposite Teck Resources and Compass Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources position performs unexpectedly, Compass 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 Compass Minerals will offset losses from the drop in Compass Minerals' long position.| Teck Resources vs. Vale SA ADR | Teck Resources vs. BHP Group Limited | Teck Resources vs. Glencore PLC ADR | Teck Resources vs. Piedmont Lithium Ltd |
| Compass Minerals vs. Vale SA ADR | Compass Minerals vs. BHP Group Limited | Compass Minerals vs. Glencore PLC ADR | Compass Minerals vs. Piedmont Lithium Ltd |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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