Correlation Between Anglo American and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both Anglo American and Sumitomo Metal 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 Sumitomo Metal 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 Sumitomo Metal Mining, you can compare the effects of market volatilities on Anglo American and Sumitomo Metal 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 Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Sumitomo Metal.
Diversification Opportunities for Anglo American and Sumitomo Metal
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and Sumitomo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining 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 Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Anglo American i.e., Anglo American and Sumitomo Metal go up and down completely randomly.
Pair Corralation between Anglo American and Sumitomo Metal
Assuming the 90 days horizon Anglo American PLC is expected to generate 0.87 times more return on investment than Sumitomo Metal. However, Anglo American PLC is 1.15 times less risky than Sumitomo Metal. It trades about -0.11 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.18 per unit of risk. If you would invest 1,578 in Anglo American PLC on August 26, 2024 and sell it today you would lose (92.00) from holding Anglo American PLC or give up 5.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American PLC vs. Sumitomo Metal Mining
Performance |
| Timeline |
| Anglo American PLC |
| Sumitomo Metal Mining |
Anglo American and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Sumitomo Metal
The main advantage of trading using opposite Anglo American and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Sumitomo Metal 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 Sumitomo Metal will offset losses from the drop in Sumitomo Metal's long position.| Anglo American vs. Ascendant Resources | Anglo American vs. Cantex Mine Development | Anglo American vs. Amarc Resources | Anglo American vs. Sterling Metals Corp |
| Sumitomo Metal vs. Boliden AB ADR | Sumitomo Metal vs. Anglo American PLC | Sumitomo Metal vs. Glencore PLC | Sumitomo Metal vs. Snow Lake Resources |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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