Correlation Between Anglo American and Exxaro Resources
Can any of the company-specific risk be diversified away by investing in both Anglo American and Exxaro 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 Exxaro 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 Exxaro Resources, you can compare the effects of market volatilities on Anglo American and Exxaro 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 Exxaro Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Exxaro Resources.
Diversification Opportunities for Anglo American and Exxaro Resources
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Anglo and Exxaro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Exxaro Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro 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 Exxaro Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Resources has no effect on the direction of Anglo American i.e., Anglo American and Exxaro Resources go up and down completely randomly.
Pair Corralation between Anglo American and Exxaro Resources
Assuming the 90 days trading horizon Anglo American PLC is expected to generate 1.35 times more return on investment than Exxaro Resources. However, Anglo American is 1.35 times more volatile than Exxaro Resources. It trades about 0.03 of its potential returns per unit of risk. Exxaro Resources is currently generating about -0.03 per unit of risk. If you would invest 4,734,900 in Anglo American PLC on September 24, 2024 and sell it today you would earn a total of 540,000 from holding Anglo American PLC or generate 11.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Anglo American PLC vs. Exxaro Resources
Performance |
Timeline |
Anglo American PLC |
Exxaro Resources |
Anglo American and Exxaro Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Anglo American and Exxaro Resources
The main advantage of trading using opposite Anglo American and Exxaro Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Exxaro 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 Exxaro Resources will offset losses from the drop in Exxaro Resources' long position.Anglo American vs. Glencore PLC | Anglo American vs. South32 | Anglo American vs. African Rainbow Minerals | Anglo American vs. Jubilee Platinum |
Exxaro Resources vs. Thungela Resources Limited | Exxaro Resources vs. MC Mining | Exxaro Resources vs. Afine Investments | Exxaro Resources vs. Capitec Bank Holdings |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |