Correlation Between AngloGold Ashanti and West Fraser

Can any of the company-specific risk be diversified away by investing in both AngloGold Ashanti and West Fraser 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 West Fraser 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 West Fraser Timber, you can compare the effects of market volatilities on AngloGold Ashanti and West Fraser 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 West Fraser. Check out your portfolio center. Please also check ongoing floating volatility patterns of AngloGold Ashanti and West Fraser.

Diversification Opportunities for AngloGold Ashanti and West Fraser

-0.55

Correlation Coefficient

AngloGold Ashanti  West Fraser

Excellent diversification

The 3 months correlation between AngloGold and West is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber 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 West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of AngloGold Ashanti i.e., AngloGold Ashanti and West Fraser go up and down completely randomly.

Pair Corralation between AngloGold Ashanti and West Fraser

Allowing for the 90-day total investment horizon AngloGold Ashanti plc is expected to generate 1.65 times more return on investment than West Fraser. However, AngloGold Ashanti is 1.65 times more volatile than West Fraser Timber. It trades about 0.25 of its potential returns per unit of risk. West Fraser Timber is currently generating about -0.44 per unit of risk. If you would invest  2,801  in AngloGold Ashanti plc on November 28, 2024 and sell it today you would earn a total of  386.00  from holding AngloGold Ashanti plc or generate 13.78% return on investment over 90 days.

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

AngloGold Ashanti plc  vs.  West Fraser Timber

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.

West Fraser Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days West Fraser Timber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AngloGold Ashanti and West Fraser

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

The idea behind AngloGold Ashanti plc and West Fraser Timber 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.