Correlation Between Glencore PLC and Canadian Palladium

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

Diversification Opportunities for Glencore PLC and Canadian Palladium

-0.75

Correlation Coefficient

Glencore PLC  Canadian Palladium

Pay attention - limited upside

The 3 months correlation between Glencore and Canadian is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Canadian Palladium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Palladium 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 Canadian Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Palladium has no effect on the direction of Glencore PLC i.e., Glencore PLC and Canadian Palladium go up and down completely randomly.

Pair Corralation between Glencore PLC and Canadian Palladium

Assuming the 90 days horizon Glencore PLC ADR is expected to under-perform the Canadian Palladium. But the pink sheet apears to be less risky and, when comparing its historical volatility, Glencore PLC ADR is 4.96 times less risky than Canadian Palladium. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Canadian Palladium Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Canadian Palladium Resources on February 3, 2024 and sell it today you would earn a total of  3.00  from holding Canadian Palladium Resources or generate 15.79% return on investment over 90 days.

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

Glencore PLC ADR  vs.  Canadian Palladium Resources

Glencore PLC ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Glencore PLC may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Canadian Palladium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Palladium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Glencore PLC and Canadian Palladium

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

The idea behind Glencore PLC ADR and Canadian Palladium 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.