Correlation Between Largo Resources and Anglo American
Can any of the company-specific risk be diversified away by investing in both Largo Resources 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 Largo Resources and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Largo Resources and Anglo American plc, you can compare the effects of market volatilities on Largo Resources 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 Largo Resources with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largo Resources and Anglo American.
Diversification Opportunities for Largo Resources and Anglo American
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Largo and Anglo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Largo Resources 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 Largo Resources 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 Largo Resources 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 Largo Resources i.e., Largo Resources and Anglo American go up and down completely randomly.
Pair Corralation between Largo Resources and Anglo American
Considering the 90-day investment horizon Largo Resources is expected to generate 2.93 times more return on investment than Anglo American. However, Largo Resources is 2.93 times more volatile than Anglo American plc. It trades about 0.01 of its potential returns per unit of risk. Anglo American plc is currently generating about -0.05 per unit of risk. If you would invest 207.00 in Largo Resources on August 26, 2024 and sell it today you would lose (4.00) from holding Largo Resources or give up 1.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Largo Resources vs. Anglo American plc
Performance |
| Timeline |
| Largo Resources |
| Anglo American plc |
Largo Resources and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Largo Resources and Anglo American
The main advantage of trading using opposite Largo Resources and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Largo Resources 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.| Largo Resources vs. Skeena Resources | Largo Resources vs. Materion | Largo Resources vs. Compass Minerals International | Largo Resources vs. IperionX Limited American |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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