Correlation Between Anglo American and African Rainbow
Can any of the company-specific risk be diversified away by investing in both Anglo American and African Rainbow 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 African Rainbow 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 African Rainbow Minerals, you can compare the effects of market volatilities on Anglo American and African Rainbow 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 African Rainbow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and African Rainbow.
Diversification Opportunities for Anglo American and African Rainbow
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Anglo and African is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and African Rainbow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Minerals 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 African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Minerals has no effect on the direction of Anglo American i.e., Anglo American and African Rainbow go up and down completely randomly.
Pair Corralation between Anglo American and African Rainbow
Assuming the 90 days trading horizon Anglo American PLC is expected to under-perform the African Rainbow. But the stock apears to be less risky and, when comparing its historical volatility, Anglo American PLC is 1.1 times less risky than African Rainbow. The stock trades about -0.03 of its potential returns per unit of risk. The African Rainbow Minerals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,539,600 in African Rainbow Minerals on November 2, 2024 and sell it today you would earn a total of 70,700 from holding African Rainbow Minerals or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Anglo American PLC vs. African Rainbow Minerals
Performance |
| Timeline |
| Anglo American PLC |
| African Rainbow Minerals |
Anglo American and African Rainbow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and African Rainbow
The main advantage of trading using opposite Anglo American and African Rainbow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, African Rainbow 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 African Rainbow will offset losses from the drop in African Rainbow's long position.| Anglo American vs. Advtech | Anglo American vs. CA Sales Holdings | Anglo American vs. African Media Entertainment | Anglo American vs. RCL Foods |
| African Rainbow vs. Glencore PLC | African Rainbow vs. Anglo American PLC | African Rainbow vs. South32 | African Rainbow vs. Jubilee Platinum |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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