Correlation Between Teck Resources and Ferroglobe PLC
Can any of the company-specific risk be diversified away by investing in both Teck Resources and Ferroglobe 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 Teck Resources and Ferroglobe PLC 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 Ferroglobe PLC, you can compare the effects of market volatilities on Teck Resources and Ferroglobe 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 Teck Resources with a short position of Ferroglobe PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Ferroglobe PLC.
Diversification Opportunities for Teck Resources and Ferroglobe PLC
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Teck and Ferroglobe is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and Ferroglobe PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferroglobe PLC 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 Ferroglobe PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferroglobe PLC has no effect on the direction of Teck Resources i.e., Teck Resources and Ferroglobe PLC go up and down completely randomly.
Pair Corralation between Teck Resources and Ferroglobe PLC
Given the investment horizon of 90 days Teck Resources is expected to generate 4.27 times less return on investment than Ferroglobe PLC. But when comparing it to its historical volatility, Teck Resources Ltd is 1.22 times less risky than Ferroglobe PLC. It trades about 0.0 of its potential returns per unit of risk. Ferroglobe PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 440.00 in Ferroglobe PLC on August 29, 2024 and sell it today you would lose (3.00) from holding Ferroglobe PLC or give up 0.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Ltd vs. Ferroglobe PLC
Performance |
| Timeline |
| Teck Resources |
| Ferroglobe PLC |
Teck Resources and Ferroglobe PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Ferroglobe PLC
The main advantage of trading using opposite Teck Resources and Ferroglobe PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources position performs unexpectedly, Ferroglobe 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 Ferroglobe PLC will offset losses from the drop in Ferroglobe PLC's long position.| Teck Resources vs. Rio Tinto ADR | Teck Resources vs. Vale SA ADR | Teck Resources vs. MP Materials Corp | Teck Resources vs. Lithium Americas Corp |
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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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