Correlation Between ANGLO AMERICAN and Western Copper
Can any of the company-specific risk be diversified away by investing in both ANGLO AMERICAN and Western Copper 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 Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ANGLO AMERICAN SPADR and Western Copper and, you can compare the effects of market volatilities on ANGLO AMERICAN and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANGLO AMERICAN and Western Copper.
Diversification Opportunities for ANGLO AMERICAN and Western Copper
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between ANGLO and Western is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ANGLO AMERICAN SPADR and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 SPADR are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of ANGLO AMERICAN i.e., ANGLO AMERICAN and Western Copper go up and down completely randomly.
Pair Corralation between ANGLO AMERICAN and Western Copper
Assuming the 90 days trading horizon ANGLO AMERICAN is expected to generate 1.62 times less return on investment than Western Copper. But when comparing it to its historical volatility, ANGLO AMERICAN SPADR is 1.56 times less risky than Western Copper. It trades about 0.08 of its potential returns per unit of risk. Western Copper and is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 96.00 in Western Copper and on September 5, 2024 and sell it today you would earn a total of 6.00 from holding Western Copper and or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ANGLO AMERICAN SPADR vs. Western Copper and
Performance |
| Timeline |
| ANGLO AMERICAN SPADR |
| Western Copper |
ANGLO AMERICAN and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ANGLO AMERICAN and Western Copper
The main advantage of trading using opposite ANGLO AMERICAN and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANGLO AMERICAN position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.The idea behind ANGLO AMERICAN SPADR and Western Copper and 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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