Correlation Between Teck Resources and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Teck Resources and Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals Group, you can compare the effects of market volatilities on Teck Resources and Fortescue Metals 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 Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Fortescue Metals.
Diversification Opportunities for Teck Resources and Fortescue Metals
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Teck and Fortescue is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Teck Resources i.e., Teck Resources and Fortescue Metals go up and down completely randomly.
Pair Corralation between Teck Resources and Fortescue Metals
Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 0.89 times more return on investment than Fortescue Metals. However, Teck Resources Ltd is 1.12 times less risky than Fortescue Metals. It trades about -0.01 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.03 per unit of risk. If you would invest 4,719 in Teck Resources Ltd on August 31, 2024 and sell it today you would lose (51.00) from holding Teck Resources Ltd or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Ltd vs. Fortescue Metals Group
Performance |
| Timeline |
| Teck Resources |
| Fortescue Metals |
Teck Resources and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Fortescue Metals
The main advantage of trading using opposite Teck Resources and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Teck Resources vs. Piedmont Lithium Ltd | Teck Resources vs. Standard Lithium | Teck Resources vs. Vale SA ADR | Teck Resources vs. BHP Group Limited |
| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Hannan Metals |
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 CEOs Directory module to screen CEOs from public companies around the world.
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