Correlation Between Glencore PLC and AMG Advanced

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

By analyzing existing cross correlation between Glencore PLC ADR and AMG Advanced Metallurgical, you can compare the effects of market volatilities on Glencore PLC and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and AMG Advanced.

Diversification Opportunities for Glencore PLC and AMG Advanced

0.76

Correlation Coefficient

Glencore PLC  AMG Advanced

Poor diversification

The 3 months correlation between Glencore and AMG is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 ADR are associated (or correlated) with AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Glencore PLC i.e., Glencore PLC and AMG Advanced go up and down completely randomly.

Pair Corralation between Glencore PLC and AMG Advanced

Assuming the 90 days horizon Glencore PLC ADR is expected to generate 0.49 times more return on investment than AMG Advanced. However, Glencore PLC ADR is 2.04 times less risky than AMG Advanced. It trades about 0.28 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about 0.03 per unit of risk. If you would invest  1,164  in Glencore PLC ADR on February 20, 2024 and sell it today you would earn a total of  101.00  from holding Glencore PLC ADR or generate 8.68% return on investment over 90 days.

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

Glencore PLC ADR  vs.  AMG Advanced Metallurgical

Glencore PLC ADR

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Glencore PLC showed solid returns over the last few months and may actually be approaching a breakup point.

AMG Advanced Metallu

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Glencore PLC and AMG Advanced

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

The idea behind Glencore PLC ADR and AMG Advanced Metallurgical 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.