Correlation Between Glencore PLC and Iluka Resources

Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Iluka 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 Iluka 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 Iluka Resources Ltd, you can compare the effects of market volatilities on Glencore PLC and Iluka 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 Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Iluka Resources.

Diversification Opportunities for Glencore PLC and Iluka Resources

0.88

Correlation Coefficient

Glencore PLC  Iluka Resources

Very poor diversification

The 3 months correlation between Glencore and Iluka is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Iluka Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iluka 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 Iluka Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iluka Resources has no effect on the direction of Glencore PLC i.e., Glencore PLC and Iluka Resources go up and down completely randomly.

Pair Corralation between Glencore PLC and Iluka Resources

Assuming the 90 days horizon Glencore PLC is expected to generate 0.69 times more return on investment than Iluka Resources. However, Glencore PLC is 1.46 times less risky than Iluka Resources. It trades about -0.02 of its potential returns per unit of risk. Iluka Resources Ltd is currently generating about -0.04 per unit of risk. If you would invest  495.00  in Glencore PLC on August 31, 2024 and sell it today you would lose (17.00) from holding Glencore PLC or give up 3.43% of portfolio value over 90 days.

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

Glencore PLC  vs.  Iluka Resources Ltd

Glencore PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Glencore PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iluka Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iluka Resources Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Glencore PLC and Iluka Resources

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

The idea behind Glencore PLC and Iluka Resources Ltd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.