Correlation Between AngloGold Ashanti and Agnico Eagle

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

By analyzing existing cross correlation between AngloGold Ashanti plc and Agnico Eagle Mines, you can compare the effects of market volatilities on AngloGold Ashanti and Agnico Eagle 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 AngloGold Ashanti with a short position of Agnico Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of AngloGold Ashanti and Agnico Eagle.

Diversification Opportunities for AngloGold Ashanti and Agnico Eagle

0.97

Correlation Coefficient

AngloGold Ashanti  Agnico Eagle

Almost no diversification

The 3 months correlation between AngloGold and Agnico is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines and AngloGold Ashanti 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 AngloGold Ashanti plc are associated (or correlated) with Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of AngloGold Ashanti i.e., AngloGold Ashanti and Agnico Eagle go up and down completely randomly.

Pair Corralation between AngloGold Ashanti and Agnico Eagle

Allowing for the 90-day total investment horizon AngloGold Ashanti plc is expected to generate 1.27 times more return on investment than Agnico Eagle. However, AngloGold Ashanti is 1.27 times more volatile than Agnico Eagle Mines. It trades about 0.18 of its potential returns per unit of risk. Agnico Eagle Mines is currently generating about 0.13 per unit of risk. If you would invest  2,494  in AngloGold Ashanti plc on November 28, 2024 and sell it today you would earn a total of  693.00  from holding AngloGold Ashanti plc or generate 27.79% return on investment over 90 days.

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

AngloGold Ashanti plc  vs.  Agnico Eagle Mines

AngloGold Ashanti plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AngloGold Ashanti unveiled solid returns over the last few months and may actually be approaching a breakup point.

Agnico Eagle Mines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AngloGold Ashanti and Agnico Eagle

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

The idea behind AngloGold Ashanti plc and Agnico Eagle Mines 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.