Correlation Between IGO and Anglo American
Can any of the company-specific risk be diversified away by investing in both IGO and Anglo American 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 IGO and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Anglo American plc, you can compare the effects of market volatilities on IGO and Anglo American 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 IGO with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Anglo American.
Diversification Opportunities for IGO and Anglo American
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IGO and Anglo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American plc and IGO 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 IGO Limited are associated (or correlated) with Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of IGO i.e., IGO and Anglo American go up and down completely randomly.
Pair Corralation between IGO and Anglo American
Assuming the 90 days horizon IGO Limited is expected to under-perform the Anglo American. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 1.29 times less risky than Anglo American. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Anglo American plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,833 in Anglo American plc on August 26, 2024 and sell it today you would lose (882.00) from holding Anglo American plc or give up 23.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.53% |
| Values | Daily Returns |
IGO Limited vs. Anglo American plc
Performance |
| Timeline |
| IGO Limited |
| Anglo American plc |
IGO and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Anglo American
The main advantage of trading using opposite IGO and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American's long position.| IGO vs. Qubec Nickel Corp | IGO vs. Nickel Mines Limited | IGO vs. Mineral Resources Limited | IGO vs. Surge Copper Corp |
| Anglo American vs. Glencore PLC ADR | Anglo American vs. Fortescue Metals Group | Anglo American vs. South32 Limited | Anglo American vs. South32 ADR |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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