Correlation Between Anglo American and Western Alaska
Can any of the company-specific risk be diversified away by investing in both Anglo American and Western Alaska 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 Western Alaska into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anglo American Platinum and Western Alaska Minerals, you can compare the effects of market volatilities on Anglo American and Western Alaska 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 Western Alaska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Western Alaska.
Diversification Opportunities for Anglo American and Western Alaska
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Anglo and Western is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Western Alaska Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alaska 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 Platinum are associated (or correlated) with Western Alaska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alaska Minerals has no effect on the direction of Anglo American i.e., Anglo American and Western Alaska go up and down completely randomly.
Pair Corralation between Anglo American and Western Alaska
Assuming the 90 days horizon Anglo American is expected to generate 1.13 times less return on investment than Western Alaska. But when comparing it to its historical volatility, Anglo American Platinum is 2.3 times less risky than Western Alaska. It trades about 0.23 of its potential returns per unit of risk. Western Alaska Minerals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 36.00 in Western Alaska Minerals on November 3, 2024 and sell it today you would earn a total of 4.00 from holding Western Alaska Minerals or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Anglo American Platinum vs. Western Alaska Minerals
Performance |
| Timeline |
| Anglo American Platinum |
| Western Alaska Minerals |
Anglo American and Western Alaska Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Western Alaska
The main advantage of trading using opposite Anglo American and Western Alaska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Western Alaska 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 Western Alaska will offset losses from the drop in Western Alaska's long position.| Anglo American vs. Southern Silver Exploration | Anglo American vs. Summa Silver Corp | Anglo American vs. GoGold Resources | Anglo American vs. Austral Gold Limited |
| Western Alaska vs. First Tellurium Corp | Western Alaska vs. Max Resource Corp | Western Alaska vs. P2 Gold | Western Alaska vs. CMC Metals |
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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