Correlation Between Austral Gold and Anglo American

Can any of the company-specific risk be diversified away by investing in both Austral Gold 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 Austral Gold and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austral Gold Limited and Anglo American Platinum, you can compare the effects of market volatilities on Austral Gold 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 Austral Gold with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austral Gold and Anglo American.

Diversification Opportunities for Austral Gold and Anglo American

0.22

Correlation Coefficient

Austral Gold  Anglo American

Modest diversification

The 3 months correlation between Austral and Anglo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Austral Gold Limited and Anglo American Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American Platinum and Austral Gold 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 Austral Gold 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 Platinum has no effect on the direction of Austral Gold i.e., Austral Gold and Anglo American go up and down completely randomly.

Pair Corralation between Austral Gold and Anglo American

Assuming the 90 days horizon Austral Gold Limited is expected to generate 9.27 times more return on investment than Anglo American. However, Austral Gold is 9.27 times more volatile than Anglo American Platinum. It trades about 0.14 of its potential returns per unit of risk. Anglo American Platinum is currently generating about 0.18 per unit of risk. If you would invest  1.32  in Austral Gold Limited on December 29, 2024 and sell it today you would earn a total of  1.74  from holding Austral Gold Limited or generate 131.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Austral Gold Limited  vs.  Anglo American Platinum

Austral Gold Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Anglo American Platinum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Anglo American showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austral Gold and Anglo American

The main advantage of trading using opposite Austral Gold and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austral Gold 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.

The idea behind Austral Gold Limited and Anglo American Platinum 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.