Correlation Between NYSE Composite and AngloGold Ashanti

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and AngloGold Ashanti 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 NYSE Composite and AngloGold Ashanti into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and AngloGold Ashanti plc, you can compare the effects of market volatilities on NYSE Composite and AngloGold Ashanti 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 NYSE Composite with a short position of AngloGold Ashanti. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and AngloGold Ashanti.

Diversification Opportunities for NYSE Composite and AngloGold Ashanti

0.37

Correlation Coefficient

NYSE Composite  AngloGold Ashanti

Weak diversification

The 3 months correlation between NYSE and AngloGold is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc and NYSE Composite 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 NYSE Composite are associated (or correlated) with AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of NYSE Composite i.e., NYSE Composite and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between NYSE Composite and AngloGold Ashanti

Assuming the 90 days trading horizon NYSE Composite is expected to generate 43.43 times less return on investment than AngloGold Ashanti. But when comparing it to its historical volatility, NYSE Composite is 3.06 times less risky than AngloGold Ashanti. It trades about 0.02 of its potential returns per unit of risk. AngloGold Ashanti plc is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  2,240  in AngloGold Ashanti plc on December 29, 2024 and sell it today you would earn a total of  1,458  from holding AngloGold Ashanti plc or generate 65.09% return on investment over 90 days.

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

NYSE Composite  vs.  AngloGold Ashanti plc

Pair Trading with NYSE Composite and AngloGold Ashanti

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

The idea behind NYSE Composite and AngloGold Ashanti 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.