Correlation Between Anglo American and Compagnie Financire

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

Diversification Opportunities for Anglo American and Compagnie Financire

0.35

Correlation Coefficient

Anglo American  Compagnie Financire

Weak diversification

The 3 months correlation between Anglo and Compagnie is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire 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 Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of Anglo American i.e., Anglo American and Compagnie Financire go up and down completely randomly.

Pair Corralation between Anglo American and Compagnie Financire

Assuming the 90 days trading horizon Anglo American PLC is expected to under-perform the Compagnie Financire. But the stock apears to be less risky and, when comparing its historical volatility, Anglo American PLC is 1.18 times less risky than Compagnie Financire. The stock trades about -0.04 of its potential returns per unit of risk. The Compagnie Financire Richemont is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  27,030,000  in Compagnie Financire Richemont on October 12, 2024 and sell it today you would earn a total of  2,160,000  from holding Compagnie Financire Richemont or generate 7.99% 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.  Compagnie Financire Richemont

Anglo American PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Anglo American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Compagnie Financire

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Compagnie Financire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Anglo American and Compagnie Financire

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

The idea behind Anglo American PLC and Compagnie Financire Richemont 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.