Correlation Between Anglo American and Snow Lake
Can any of the company-specific risk be diversified away by investing in both Anglo American and Snow Lake 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 Snow Lake 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 Snow Lake Resources, you can compare the effects of market volatilities on Anglo American and Snow Lake 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 Snow Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Snow Lake.
Diversification Opportunities for Anglo American and Snow Lake
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Anglo and Snow is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Snow Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Lake Resources 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 Snow Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Lake Resources has no effect on the direction of Anglo American i.e., Anglo American and Snow Lake go up and down completely randomly.
Pair Corralation between Anglo American and Snow Lake
Assuming the 90 days horizon Anglo American PLC is expected to generate 0.43 times more return on investment than Snow Lake. However, Anglo American PLC is 2.35 times less risky than Snow Lake. It trades about -0.1 of its potential returns per unit of risk. Snow Lake Resources is currently generating about -0.33 per unit of risk. If you would invest 1,610 in Anglo American PLC on August 30, 2024 and sell it today you would lose (94.00) from holding Anglo American PLC or give up 5.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Anglo American PLC vs. Snow Lake Resources
Performance |
| Timeline |
| Anglo American PLC |
| Snow Lake Resources |
Anglo American and Snow Lake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Snow Lake
The main advantage of trading using opposite Anglo American and Snow Lake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Snow Lake 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 Snow Lake will offset losses from the drop in Snow Lake's long position.| Anglo American vs. BHP Group Limited | Anglo American vs. Avarone Metals | Anglo American vs. Huntsman Exploration | Anglo American vs. Aurelia Metals Limited |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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