Correlation Between AngloGold Ashanti and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both AngloGold Ashanti and Reliance Steel 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 AngloGold Ashanti and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AngloGold Ashanti plc and Reliance Steel Aluminum, you can compare the effects of market volatilities on AngloGold Ashanti and Reliance Steel 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 AngloGold Ashanti with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of AngloGold Ashanti and Reliance Steel.
Diversification Opportunities for AngloGold Ashanti and Reliance Steel
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AngloGold and Reliance is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and AngloGold Ashanti 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 AngloGold Ashanti plc are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of AngloGold Ashanti i.e., AngloGold Ashanti and Reliance Steel go up and down completely randomly.
Pair Corralation between AngloGold Ashanti and Reliance Steel
Allowing for the 90-day total investment horizon AngloGold Ashanti plc is expected to generate 1.51 times more return on investment than Reliance Steel. However, AngloGold Ashanti is 1.51 times more volatile than Reliance Steel Aluminum. It trades about 0.05 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.04 per unit of risk. If you would invest 1,974 in AngloGold Ashanti plc on August 27, 2024 and sell it today you would earn a total of 621.00 from holding AngloGold Ashanti plc or generate 31.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AngloGold Ashanti plc vs. Reliance Steel Aluminum
Performance |
| Timeline |
| AngloGold Ashanti plc |
| Reliance Steel Aluminum |
AngloGold Ashanti and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AngloGold Ashanti and Reliance Steel
The main advantage of trading using opposite AngloGold Ashanti and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AngloGold Ashanti position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.The idea behind AngloGold Ashanti plc and Reliance Steel Aluminum pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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