Correlation Between Glencore PLC and Commander Resources

Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Commander Resources 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 Glencore PLC and Commander Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Glencore PLC and Commander Resources, you can compare the effects of market volatilities on Glencore PLC and Commander Resources 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 Glencore PLC with a short position of Commander Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Commander Resources.

Diversification Opportunities for Glencore PLC and Commander Resources

0.85

Correlation Coefficient

Glencore PLC  Commander Resources

Very poor diversification

The 3 months correlation between Glencore and Commander is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources and Glencore PLC 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 Glencore PLC are associated (or correlated) with Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Glencore PLC i.e., Glencore PLC and Commander Resources go up and down completely randomly.

Pair Corralation between Glencore PLC and Commander Resources

Assuming the 90 days horizon Glencore PLC is expected to generate 2.81 times less return on investment than Commander Resources. But when comparing it to its historical volatility, Glencore PLC is 3.54 times less risky than Commander Resources. It trades about 0.05 of its potential returns per unit of risk. Commander Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.70  in Commander Resources on February 16, 2024 and sell it today you would earn a total of  0.80  from holding Commander Resources or generate 17.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Glencore PLC  vs.  Commander Resources

Glencore PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Glencore PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Commander Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commander Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Commander Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glencore PLC and Commander Resources

The main advantage of trading using opposite Glencore PLC and Commander Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, Commander Resources 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 Commander Resources will offset losses from the drop in Commander Resources' long position.

The idea behind Glencore PLC and Commander Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.