Correlation Between Ardea Resources and Anglo American

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

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

Diversification Opportunities for Ardea Resources and Anglo American

-0.07

Correlation Coefficient

Ardea Resources  Anglo American

Good diversification

The 3 months correlation between Ardea and Anglo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ardea Resources Limited and Anglo American PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American PLC and Ardea 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 Ardea Resources 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 PLC has no effect on the direction of Ardea Resources i.e., Ardea Resources and Anglo American go up and down completely randomly.

Pair Corralation between Ardea Resources and Anglo American

Assuming the 90 days horizon Ardea Resources Limited is expected to generate 4.5 times more return on investment than Anglo American. However, Ardea Resources is 4.5 times more volatile than Anglo American PLC. It trades about 0.03 of its potential returns per unit of risk. Anglo American PLC is currently generating about -0.31 per unit of risk. If you would invest  19.00  in Ardea Resources Limited on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Ardea Resources Limited or generate 0.0% return on investment over 90 days.

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

Ardea Resources Limited  vs.  Anglo American PLC

Ardea Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardea Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Anglo American PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ardea Resources and Anglo American

The main advantage of trading using opposite Ardea Resources and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ardea Resources 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 Ardea Resources Limited and Anglo American PLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.