Correlation Between Piedmont Lithium and Anglo American
Can any of the company-specific risk be diversified away by investing in both Piedmont Lithium 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 Piedmont Lithium and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Piedmont Lithium Ltd and Anglo American PLC, you can compare the effects of market volatilities on Piedmont Lithium 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 Piedmont Lithium with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piedmont Lithium and Anglo American.
Diversification Opportunities for Piedmont Lithium and Anglo American
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Piedmont and Anglo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium Ltd 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 Piedmont Lithium 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 Piedmont Lithium Ltd 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 Piedmont Lithium i.e., Piedmont Lithium and Anglo American go up and down completely randomly.
Pair Corralation between Piedmont Lithium and Anglo American
Considering the 90-day investment horizon Piedmont Lithium Ltd is expected to under-perform the Anglo American. In addition to that, Piedmont Lithium is 1.87 times more volatile than Anglo American PLC. It trades about -0.03 of its total potential returns per unit of risk. Anglo American PLC is currently generating about 0.0 per unit of volatility. If you would invest 1,877 in Anglo American PLC on August 24, 2024 and sell it today you would lose (391.00) from holding Anglo American PLC or give up 20.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Piedmont Lithium Ltd vs. Anglo American PLC
Performance |
| Timeline |
| Piedmont Lithium |
| Anglo American PLC |
Piedmont Lithium and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Piedmont Lithium and Anglo American
The main advantage of trading using opposite Piedmont Lithium and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piedmont Lithium 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.| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
| Anglo American vs. Ascendant Resources | Anglo American vs. Cantex Mine Development | Anglo American vs. Amarc Resources | Anglo American vs. Sterling Metals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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