Correlation Between Anglo American and Glencore Plc
Can any of the company-specific risk be diversified away by investing in both Anglo American and Glencore Plc 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 Glencore Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anglo American plc and Glencore plc, you can compare the effects of market volatilities on Anglo American and Glencore Plc 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 Glencore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Glencore Plc.
Diversification Opportunities for Anglo American and Glencore Plc
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and Glencore is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and Glencore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore plc 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 plc are associated (or correlated) with Glencore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore plc has no effect on the direction of Anglo American i.e., Anglo American and Glencore Plc go up and down completely randomly.
Pair Corralation between Anglo American and Glencore Plc
Assuming the 90 days trading horizon Anglo American plc is expected to generate 1.08 times more return on investment than Glencore Plc. However, Anglo American is 1.08 times more volatile than Glencore plc. It trades about -0.05 of its potential returns per unit of risk. Glencore plc is currently generating about -0.09 per unit of risk. If you would invest 2,947 in Anglo American plc on August 31, 2024 and sell it today you would lose (95.00) from holding Anglo American plc or give up 3.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American plc vs. Glencore plc
Performance |
| Timeline |
| Anglo American plc |
| Glencore plc |
Anglo American and Glencore Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Glencore Plc
The main advantage of trading using opposite Anglo American and Glencore Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Glencore Plc 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 Glencore Plc will offset losses from the drop in Glencore Plc's long position.| Anglo American vs. BHP Group Limited | Anglo American vs. Rio Tinto Group | Anglo American vs. Rio Tinto Group | Anglo American vs. Vale SA |
| Glencore Plc vs. UNITED UTILITIES GR | Glencore Plc vs. Seven West Media | Glencore Plc vs. Canadian Utilities Limited | Glencore Plc vs. XLMedia PLC |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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