Correlation Between Anglo American and Skeena Resources

Can any of the company-specific risk be diversified away by investing in both Anglo American and Skeena Resources 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 Skeena Resources 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 Skeena Resources, you can compare the effects of market volatilities on Anglo American and Skeena Resources 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 Skeena Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Skeena Resources.

Diversification Opportunities for Anglo American and Skeena Resources

0.34

Correlation Coefficient

Anglo American  Skeena Resources

Weak diversification

The 3 months correlation between Anglo and Skeena is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and Skeena Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skeena Resources 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 Skeena Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skeena Resources has no effect on the direction of Anglo American i.e., Anglo American and Skeena Resources go up and down completely randomly.

Pair Corralation between Anglo American and Skeena Resources

Assuming the 90 days horizon Anglo American is expected to generate 2.54 times less return on investment than Skeena Resources. But when comparing it to its historical volatility, Anglo American plc is 1.2 times less risky than Skeena Resources. It trades about 0.04 of its potential returns per unit of risk. Skeena Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  871.00  in Skeena Resources on December 28, 2024 and sell it today you would earn a total of  125.00  from holding Skeena Resources or generate 14.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Anglo American plc  vs.  Skeena Resources

Anglo American plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Anglo American may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Skeena Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skeena Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Skeena Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Skeena Resources

The main advantage of trading using opposite Anglo American and Skeena Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Skeena Resources 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 Skeena Resources will offset losses from the drop in Skeena Resources' long position.

The idea behind Anglo American plc and Skeena Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.