Correlation Between Anglo American and Star Royalties

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

By analyzing existing cross correlation between Anglo American Platinum and Star Royalties, you can compare the effects of market volatilities on Anglo American and Star Royalties 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 Star Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Star Royalties.

Diversification Opportunities for Anglo American and Star Royalties

0.71

Correlation Coefficient

Anglo American  Star Royalties

Poor diversification

The 3 months correlation between Anglo and Star is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Royalties 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 Platinum are associated (or correlated) with Star Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Royalties has no effect on the direction of Anglo American i.e., Anglo American and Star Royalties go up and down completely randomly.

Pair Corralation between Anglo American and Star Royalties

Assuming the 90 days horizon Anglo American Platinum is expected to generate 1.01 times more return on investment than Star Royalties. However, Anglo American is 1.01 times more volatile than Star Royalties. It trades about 0.02 of its potential returns per unit of risk. Star Royalties is currently generating about 0.02 per unit of risk. If you would invest  567.00  in Anglo American Platinum on September 5, 2024 and sell it today you would earn a total of  3.00  from holding Anglo American Platinum or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Anglo American Platinum  vs.  Star Royalties

Anglo American Platinum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Anglo American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Star Royalties

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Royalties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Star Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Anglo American and Star Royalties

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

The idea behind Anglo American Platinum and Star Royalties 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.