Correlation Between Anglo American and Glencore PLC

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

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

Diversification Opportunities for Anglo American and Glencore PLC

0.27

Correlation Coefficient

Anglo American  Glencore PLC

Modest diversification

The 3 months correlation between Anglo and Glencore is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Glencore PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC ADR and Anglo American 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 Anglo American PLC are associated (or correlated) with Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC ADR has no effect on the direction of Anglo American i.e., Anglo American and Glencore PLC go up and down completely randomly.

Pair Corralation between Anglo American and Glencore PLC

Assuming the 90 days horizon Anglo American PLC is expected to generate 1.11 times more return on investment than Glencore PLC. However, Anglo American is 1.11 times more volatile than Glencore PLC ADR. It trades about 0.01 of its potential returns per unit of risk. Glencore PLC ADR is currently generating about -0.12 per unit of risk. If you would invest  1,459  in Anglo American PLC on December 29, 2024 and sell it today you would lose (5.00) from holding Anglo American PLC or give up 0.34% of portfolio value over 90 days.

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

Anglo American PLC  vs.  Glencore PLC ADR

Anglo American PLC

Risk-Adjusted Performance

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 fairly strong basic indicators, Anglo American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Glencore PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glencore PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Anglo American and Glencore PLC

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

The idea behind Anglo American PLC and Glencore PLC ADR 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.