Correlation Between Anglo American and Allkem

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

Diversification Opportunities for Anglo American and Allkem

0.0

Correlation Coefficient

Anglo American  Allkem

Pay attention - limited upside

The 3 months correlation between Anglo and Allkem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Allkem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allkem 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 Allkem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allkem has no effect on the direction of Anglo American i.e., Anglo American and Allkem go up and down completely randomly.

Pair Corralation between Anglo American and Allkem

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Anglo American PLC  vs.  Allkem

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.

Allkem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Anglo American and Allkem

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

The idea behind Anglo American PLC and Allkem 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.