Correlation Between ANGLO AMERICAN and CHAMPION IRON
Can any of the company-specific risk be diversified away by investing in both ANGLO AMERICAN and CHAMPION IRON 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 CHAMPION IRON 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 CHAMPION IRON, you can compare the effects of market volatilities on ANGLO AMERICAN and CHAMPION IRON 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 CHAMPION IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANGLO AMERICAN and CHAMPION IRON.
Diversification Opportunities for ANGLO AMERICAN and CHAMPION IRON
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ANGLO and CHAMPION is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ANGLO AMERICAN SPADR and CHAMPION IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAMPION IRON 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 CHAMPION IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAMPION IRON has no effect on the direction of ANGLO AMERICAN i.e., ANGLO AMERICAN and CHAMPION IRON go up and down completely randomly.
Pair Corralation between ANGLO AMERICAN and CHAMPION IRON
Assuming the 90 days trading horizon ANGLO AMERICAN SPADR is expected to generate 1.01 times more return on investment than CHAMPION IRON. However, ANGLO AMERICAN is 1.01 times more volatile than CHAMPION IRON. It trades about 0.25 of its potential returns per unit of risk. CHAMPION IRON is currently generating about 0.12 per unit of risk. If you would invest 1,350 in ANGLO AMERICAN SPADR on October 24, 2024 and sell it today you would earn a total of 140.00 from holding ANGLO AMERICAN SPADR or generate 10.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ANGLO AMERICAN SPADR vs. CHAMPION IRON
Performance |
| Timeline |
| ANGLO AMERICAN SPADR |
| CHAMPION IRON |
ANGLO AMERICAN and CHAMPION IRON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ANGLO AMERICAN and CHAMPION IRON
The main advantage of trading using opposite ANGLO AMERICAN and CHAMPION IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANGLO AMERICAN position performs unexpectedly, CHAMPION IRON 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 CHAMPION IRON will offset losses from the drop in CHAMPION IRON's long position.| ANGLO AMERICAN vs. Yuexiu Transport Infrastructure | ANGLO AMERICAN vs. HEALTHSTREAM | ANGLO AMERICAN vs. CVS Health | ANGLO AMERICAN vs. AEON METALS LTD |
| CHAMPION IRON vs. Vienna Insurance Group | CHAMPION IRON vs. WillScot Mobile Mini | CHAMPION IRON vs. Goosehead Insurance | CHAMPION IRON vs. FIH MOBILE |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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