Correlation Between Anglo American and South32 ADR
Can any of the company-specific risk be diversified away by investing in both Anglo American and South32 ADR 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 South32 ADR 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 South32 ADR, you can compare the effects of market volatilities on Anglo American and South32 ADR 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 South32 ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and South32 ADR.
Diversification Opportunities for Anglo American and South32 ADR
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and South32 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and South32 ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 ADR 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 South32 ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 ADR has no effect on the direction of Anglo American i.e., Anglo American and South32 ADR go up and down completely randomly.
Pair Corralation between Anglo American and South32 ADR
Assuming the 90 days horizon Anglo American PLC is expected to under-perform the South32 ADR. In addition to that, Anglo American is 1.2 times more volatile than South32 ADR. It trades about 0.0 of its total potential returns per unit of risk. South32 ADR is currently generating about 0.0 per unit of volatility. If you would invest 1,324 in South32 ADR on August 29, 2024 and sell it today you would lose (103.00) from holding South32 ADR or give up 7.78% 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. South32 ADR
Performance |
| Timeline |
| Anglo American PLC |
| South32 ADR |
Anglo American and South32 ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and South32 ADR
The main advantage of trading using opposite Anglo American and South32 ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, South32 ADR 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 South32 ADR will offset losses from the drop in South32 ADR'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 |
| South32 ADR vs. Rockridge Resources | South32 ADR vs. Ameriwest Lithium | South32 ADR vs. Osisko Metals Incorporated | South32 ADR vs. Volt Lithium Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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