Correlation Between Compagnie Financire and Anglo American

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

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

Diversification Opportunities for Compagnie Financire and Anglo American

0.35

Correlation Coefficient

Compagnie Financire  Anglo American

Weak diversification

The 3 months correlation between Compagnie and Anglo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont 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 Compagnie Financire 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 Compagnie Financire Richemont 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 Compagnie Financire i.e., Compagnie Financire and Anglo American go up and down completely randomly.

Pair Corralation between Compagnie Financire and Anglo American

Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to generate 0.89 times more return on investment than Anglo American. However, Compagnie Financire Richemont is 1.12 times less risky than Anglo American. It trades about 0.1 of its potential returns per unit of risk. Anglo American PLC is currently generating about 0.08 per unit of risk. If you would invest  26,475,000  in Compagnie Financire Richemont on October 12, 2024 and sell it today you would earn a total of  2,514,700  from holding Compagnie Financire Richemont or generate 9.5% return on investment over 90 days.

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

Compagnie Financire Richemont  vs.  Anglo American PLC

Compagnie Financire

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Compagnie Financire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Anglo American PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Anglo American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Compagnie Financire and Anglo American

The main advantage of trading using opposite Compagnie Financire and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financire 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 Compagnie Financire Richemont 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.