Correlation Between Anglo American and Metals X
Can any of the company-specific risk be diversified away by investing in both Anglo American and Metals X 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 Metals X 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 Metals X Limited, you can compare the effects of market volatilities on Anglo American and Metals X 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 Metals X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Metals X.
Diversification Opportunities for Anglo American and Metals X
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Anglo and Metals is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Anglo American i.e., Anglo American and Metals X go up and down completely randomly.
Pair Corralation between Anglo American and Metals X
Assuming the 90 days horizon Anglo American PLC is expected to generate 0.54 times more return on investment than Metals X. However, Anglo American PLC is 1.85 times less risky than Metals X. It trades about 0.07 of its potential returns per unit of risk. Metals X Limited is currently generating about -0.17 per unit of risk. If you would invest 1,554 in Anglo American PLC on September 2, 2024 and sell it today you would earn a total of 52.00 from holding Anglo American PLC or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American PLC vs. Metals X Limited
Performance |
| Timeline |
| Anglo American PLC |
| Metals X Limited |
Anglo American and Metals X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Metals X
The main advantage of trading using opposite Anglo American and Metals X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Metals X 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 Metals X will offset losses from the drop in Metals X's long position.| Anglo American vs. South32 Limited | Anglo American vs. NioCorp Developments Ltd | Anglo American vs. HUMANA INC | Anglo American vs. SCOR PK |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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