Correlation Between Anglo American and Silver Grail

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

Diversification Opportunities for Anglo American and Silver Grail

0.15

Correlation Coefficient

Anglo American  Silver Grail

Average diversification

The 3 months correlation between Anglo and Silver is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Silver Grail Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Grail 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 Platinum are associated (or correlated) with Silver Grail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Grail Resources has no effect on the direction of Anglo American i.e., Anglo American and Silver Grail go up and down completely randomly.

Pair Corralation between Anglo American and Silver Grail

Assuming the 90 days horizon Anglo American is expected to generate 5.95 times less return on investment than Silver Grail. But when comparing it to its historical volatility, Anglo American Platinum is 9.14 times less risky than Silver Grail. It trades about 0.18 of its potential returns per unit of risk. Silver Grail Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Silver Grail Resources on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Silver Grail Resources or generate 33.33% return on investment over 90 days.

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

Anglo American Platinum  vs.  Silver Grail Resources

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.

Silver Grail Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Grail Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Silver Grail reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Silver Grail

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

The idea behind Anglo American Platinum and Silver Grail Resources 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.