Correlation Between ANZ Group and Fortescue

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

By analyzing existing cross correlation between ANZ Group Holdings and Fortescue, you can compare the effects of market volatilities on ANZ Group and Fortescue 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 ANZ Group with a short position of Fortescue. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANZ Group and Fortescue.

Diversification Opportunities for ANZ Group and Fortescue

0.56

Correlation Coefficient

ANZ Group  Fortescue

Very weak diversification

The 3 months correlation between ANZ and Fortescue is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ANZ Group Holdings and Fortescue in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue and ANZ Group 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 ANZ Group Holdings are associated (or correlated) with Fortescue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue has no effect on the direction of ANZ Group i.e., ANZ Group and Fortescue go up and down completely randomly.

Pair Corralation between ANZ Group and Fortescue

Assuming the 90 days trading horizon ANZ Group Holdings is expected to generate 0.14 times more return on investment than Fortescue. However, ANZ Group Holdings is 7.34 times less risky than Fortescue. It trades about -0.05 of its potential returns per unit of risk. Fortescue is currently generating about -0.08 per unit of risk. If you would invest  10,431  in ANZ Group Holdings on December 30, 2024 and sell it today you would lose (104.00) from holding ANZ Group Holdings or give up 1.0% of portfolio value over 90 days.

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

ANZ Group Holdings  vs.  Fortescue

ANZ Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days ANZ Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Fortescue

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortescue has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ANZ Group and Fortescue

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

The idea behind ANZ Group Holdings and Fortescue 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 Stocks Directory module to find actively traded stocks across global markets.