Correlation Between GLG Life and Teck Resources

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

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

Diversification Opportunities for GLG Life and Teck Resources

0.45

Correlation Coefficient

GLG Life  Teck Resources

Very weak diversification

The 3 months correlation between GLG and Teck is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GLG Life Tech and Teck Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources and GLG Life 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 GLG Life Tech are associated (or correlated) with Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of GLG Life i.e., GLG Life and Teck Resources go up and down completely randomly.

Pair Corralation between GLG Life and Teck Resources

Assuming the 90 days trading horizon GLG Life Tech is expected to generate 3.47 times more return on investment than Teck Resources. However, GLG Life is 3.47 times more volatile than Teck Resources Limited. It trades about 0.04 of its potential returns per unit of risk. Teck Resources Limited is currently generating about 0.06 per unit of risk. If you would invest  5.00  in GLG Life Tech on February 23, 2024 and sell it today you would earn a total of  0.00  from holding GLG Life Tech or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

GLG Life Tech  vs.  Teck Resources Limited

GLG Life Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GLG Life Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, GLG Life is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Teck Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Teck Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GLG Life and Teck Resources

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

The idea behind GLG Life Tech and Teck Resources Limited 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.