Correlation Between Anson Resources and Sumitomo Metal

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

By analyzing existing cross correlation between Anson Resources Limited and Sumitomo Metal Mining, you can compare the effects of market volatilities on Anson Resources and Sumitomo Metal 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 Anson Resources with a short position of Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anson Resources and Sumitomo Metal.

Diversification Opportunities for Anson Resources and Sumitomo Metal

-0.17

Correlation Coefficient

Anson Resources  Sumitomo Metal

Good diversification

The 3 months correlation between Anson and Sumitomo is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Anson Resources Limited and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining and Anson Resources 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 Anson Resources Limited are associated (or correlated) with Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Anson Resources i.e., Anson Resources and Sumitomo Metal go up and down completely randomly.

Pair Corralation between Anson Resources and Sumitomo Metal

Assuming the 90 days horizon Anson Resources Limited is expected to generate 15.67 times more return on investment than Sumitomo Metal. However, Anson Resources is 15.67 times more volatile than Sumitomo Metal Mining. It trades about 0.11 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about 0.02 per unit of risk. If you would invest  3.60  in Anson Resources Limited on December 29, 2024 and sell it today you would earn a total of  2.04  from holding Anson Resources Limited or generate 56.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Anson Resources Limited  vs.  Sumitomo Metal Mining

Anson Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anson Resources Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Anson Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Metal Mining

Risk-Adjusted Performance

Weak

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

Pair Trading with Anson Resources and Sumitomo Metal

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

The idea behind Anson Resources Limited and Sumitomo Metal Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.