Correlation Between Anglo American and Iluka Resources
Can any of the company-specific risk be diversified away by investing in both Anglo American 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 Anglo American and Iluka Resources 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 Iluka Resources Ltd, you can compare the effects of market volatilities on Anglo American 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 Anglo American with a short position of Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Iluka Resources.
Diversification Opportunities for Anglo American and Iluka Resources
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and Iluka is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American 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 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 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 Anglo American i.e., Anglo American and Iluka Resources go up and down completely randomly.
Pair Corralation between Anglo American and Iluka Resources
Assuming the 90 days horizon Anglo American plc is expected to generate 1.22 times more return on investment than Iluka Resources. However, Anglo American is 1.22 times more volatile than Iluka Resources Ltd. It trades about 0.02 of its potential returns per unit of risk. Iluka Resources Ltd is currently generating about -0.06 per unit of risk. If you would invest 3,029 in Anglo American plc on September 1, 2024 and sell it today you would lose (24.00) from holding Anglo American plc or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.03% |
| Values | Daily Returns |
Anglo American plc vs. Iluka Resources Ltd
Performance |
| Timeline |
| Anglo American plc |
| Iluka Resources |
Anglo American and Iluka Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Iluka Resources
The main advantage of trading using opposite Anglo American and Iluka Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American 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.| Anglo American vs. Glencore PLC ADR | Anglo American vs. Fortescue Metals Group | Anglo American vs. South32 Limited | Anglo American vs. South32 ADR |
| Iluka Resources vs. ERAMET SA | Iluka Resources vs. Giyani Metals Corp | Iluka Resources vs. IGO Limited | Iluka Resources vs. Grid Metals Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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