Correlation Between Anglo American and Centaurus Metals
Can any of the company-specific risk be diversified away by investing in both Anglo American and Centaurus Metals 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 Anglo American and Centaurus Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anglo American plc and Centaurus Metals Limited, you can compare the effects of market volatilities on Anglo American and Centaurus Metals 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 Anglo American with a short position of Centaurus Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Centaurus Metals.
Diversification Opportunities for Anglo American and Centaurus Metals
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and Centaurus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and Centaurus Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and Anglo American 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 Anglo American plc are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of Anglo American i.e., Anglo American and Centaurus Metals go up and down completely randomly.
Pair Corralation between Anglo American and Centaurus Metals
Assuming the 90 days horizon Anglo American is expected to generate 1.74 times less return on investment than Centaurus Metals. But when comparing it to its historical volatility, Anglo American plc is 2.28 times less risky than Centaurus Metals. It trades about 0.04 of its potential returns per unit of risk. Centaurus Metals Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 33.00 in Centaurus Metals Limited on September 1, 2024 and sell it today you would lose (5.00) from holding Centaurus Metals Limited or give up 15.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.26% |
| Values | Daily Returns |
Anglo American plc vs. Centaurus Metals Limited
Performance |
| Timeline |
| Anglo American plc |
| Centaurus Metals |
Anglo American and Centaurus Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Centaurus Metals
The main advantage of trading using opposite Anglo American and Centaurus Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Centaurus Metals 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 Centaurus Metals will offset losses from the drop in Centaurus Metals' long position.| Anglo American vs. Glencore PLC ADR | Anglo American vs. Fortescue Metals Group | Anglo American vs. South32 Limited | Anglo American vs. South32 ADR |
| Centaurus Metals vs. Edison Cobalt Corp | Centaurus Metals vs. Baroyeca Gold Silver | Centaurus Metals vs. Aurelia Metals Limited | Centaurus Metals vs. China Rare Earth |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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