Correlation Between Aneka Tambang and American West
Can any of the company-specific risk be diversified away by investing in both Aneka Tambang and American West 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 Aneka Tambang and American West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aneka Tambang Tbk and American West Metals, you can compare the effects of market volatilities on Aneka Tambang and American West 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 Aneka Tambang with a short position of American West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aneka Tambang and American West.
Diversification Opportunities for Aneka Tambang and American West
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aneka and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Tbk and American West Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American West Metals and Aneka Tambang 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 Aneka Tambang Tbk are associated (or correlated) with American West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American West Metals has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and American West go up and down completely randomly.
Pair Corralation between Aneka Tambang and American West
Assuming the 90 days trading horizon Aneka Tambang Tbk is expected to generate 0.67 times more return on investment than American West. However, Aneka Tambang Tbk is 1.49 times less risky than American West. It trades about -0.1 of its potential returns per unit of risk. American West Metals is currently generating about -0.39 per unit of risk. If you would invest 95.00 in Aneka Tambang Tbk on September 1, 2024 and sell it today you would lose (5.00) from holding Aneka Tambang Tbk or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aneka Tambang Tbk vs. American West Metals
Performance |
| Timeline |
| Aneka Tambang Tbk |
| American West Metals |
Aneka Tambang and American West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aneka Tambang and American West
The main advantage of trading using opposite Aneka Tambang and American West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aneka Tambang position performs unexpectedly, American West 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 American West will offset losses from the drop in American West's long position.| Aneka Tambang vs. Northern Star Resources | Aneka Tambang vs. Evolution Mining | Aneka Tambang vs. Bluescope Steel | Aneka Tambang vs. Sandfire Resources NL |
| American West vs. Westpac Banking | American West vs. Pinnacle Investment Management | American West vs. Wt Financial Group | American West vs. Regal Funds Management |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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