Correlation Between Anglo American and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both Anglo American and Standard Lithium 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 Standard Lithium 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 Standard Lithium, you can compare the effects of market volatilities on Anglo American and Standard Lithium 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 Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Standard Lithium.
Diversification Opportunities for Anglo American and Standard Lithium
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Anglo and Standard is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Anglo American i.e., Anglo American and Standard Lithium go up and down completely randomly.
Pair Corralation between Anglo American and Standard Lithium
Assuming the 90 days horizon Anglo American plc is expected to generate 0.74 times more return on investment than Standard Lithium. However, Anglo American plc is 1.36 times less risky than Standard Lithium. It trades about 0.06 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.02 per unit of risk. If you would invest 2,883 in Anglo American plc on November 18, 2024 and sell it today you would earn a total of 194.00 from holding Anglo American plc or generate 6.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American plc vs. Standard Lithium
Performance |
| Timeline |
| Anglo American plc |
| Standard Lithium |
Anglo American and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Standard Lithium
The main advantage of trading using opposite Anglo American and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Standard Lithium 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| Anglo American vs. Glencore PLC ADR | Anglo American vs. Fortescue Metals Group | Anglo American vs. South32 Limited | Anglo American vs. South32 ADR |
| Standard Lithium vs. Lithium Americas Corp | Standard Lithium vs. Piedmont Lithium Ltd | Standard Lithium vs. NioCorp Developments Ltd | Standard Lithium vs. Teck Resources Ltd |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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