Correlation Between ANGLO AMERICAN and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both ANGLO AMERICAN and Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals Limited, you can compare the effects of market volatilities on ANGLO AMERICAN and Sovereign Metals 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANGLO AMERICAN and Sovereign Metals.
Diversification Opportunities for ANGLO AMERICAN and Sovereign Metals
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ANGLO and Sovereign is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ANGLO AMERICAN SPADR and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of ANGLO AMERICAN i.e., ANGLO AMERICAN and Sovereign Metals go up and down completely randomly.
Pair Corralation between ANGLO AMERICAN and Sovereign Metals
Assuming the 90 days trading horizon ANGLO AMERICAN SPADR is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, ANGLO AMERICAN SPADR is 1.0 times less risky than Sovereign Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Sovereign Metals Limited is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Sovereign Metals Limited on August 27, 2024 and sell it today you would earn a total of 6.00 from holding Sovereign Metals Limited or generate 13.95% 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. Sovereign Metals Limited
Performance |
| Timeline |
| ANGLO AMERICAN SPADR |
| Sovereign Metals |
ANGLO AMERICAN and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ANGLO AMERICAN and Sovereign Metals
The main advantage of trading using opposite ANGLO AMERICAN and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANGLO AMERICAN position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| ANGLO AMERICAN vs. Monster Beverage Corp | ANGLO AMERICAN vs. MOLSON RS BEVERAGE | ANGLO AMERICAN vs. SLR Investment Corp | ANGLO AMERICAN vs. Fevertree Drinks PLC |
| Sovereign Metals vs. BHP Group Limited | Sovereign Metals vs. Superior Plus Corp | Sovereign Metals vs. NMI Holdings | Sovereign Metals vs. Origin Agritech |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |