Correlation Between Anglo American and Sun Summit

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

Diversification Opportunities for Anglo American and Sun Summit

-0.14

Correlation Coefficient

Anglo American  Sun Summit

Good diversification

The 3 months correlation between Anglo and Sun is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Sun Summit Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Summit Minerals 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 Sun Summit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Summit Minerals has no effect on the direction of Anglo American i.e., Anglo American and Sun Summit go up and down completely randomly.

Pair Corralation between Anglo American and Sun Summit

Assuming the 90 days horizon Anglo American PLC is expected to under-perform the Sun Summit. But the otc stock apears to be less risky and, when comparing its historical volatility, Anglo American PLC is 5.27 times less risky than Sun Summit. The otc stock trades about -0.05 of its potential returns per unit of risk. The Sun Summit Minerals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.54  in Sun Summit Minerals on November 28, 2024 and sell it today you would earn a total of  0.17  from holding Sun Summit Minerals or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Anglo American PLC  vs.  Sun Summit Minerals

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.

Sun Summit Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Summit Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Sun Summit reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Sun Summit

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

The idea behind Anglo American PLC and Sun Summit Minerals 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.