Correlation Between Nickel Mines and Anglo American
Can any of the company-specific risk be diversified away by investing in both Nickel Mines and Anglo American 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 Nickel Mines and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nickel Mines Limited and Anglo American plc, you can compare the effects of market volatilities on Nickel Mines and Anglo American 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 Nickel Mines with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nickel Mines and Anglo American.
Diversification Opportunities for Nickel Mines and Anglo American
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nickel and Anglo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nickel Mines Limited and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American plc and Nickel Mines 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 Nickel Mines Limited are associated (or correlated) with Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of Nickel Mines i.e., Nickel Mines and Anglo American go up and down completely randomly.
Pair Corralation between Nickel Mines and Anglo American
Assuming the 90 days horizon Nickel Mines Limited is expected to generate 1.03 times more return on investment than Anglo American. However, Nickel Mines is 1.03 times more volatile than Anglo American plc. It trades about 0.02 of its potential returns per unit of risk. Anglo American plc is currently generating about 0.01 per unit of risk. If you would invest 59.00 in Nickel Mines Limited on August 29, 2024 and sell it today you would lose (4.00) from holding Nickel Mines Limited or give up 6.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 88.51% |
| Values | Daily Returns |
Nickel Mines Limited vs. Anglo American plc
Performance |
| Timeline |
| Nickel Mines Limited |
| Anglo American plc |
Nickel Mines and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nickel Mines and Anglo American
The main advantage of trading using opposite Nickel Mines and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nickel Mines position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American's long position.| Nickel Mines vs. IGO Limited | Nickel Mines vs. Qubec Nickel Corp | Nickel Mines vs. Mineral Resources Limited | Nickel Mines vs. Surge Copper Corp |
| Anglo American vs. Glencore PLC ADR | Anglo American vs. Fortescue Metals Group | Anglo American vs. South32 Limited | Anglo American vs. South32 ADR |
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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