Correlation Between Allkem and Anglo American

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

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

Diversification Opportunities for Allkem and Anglo American

0.0

Correlation Coefficient

Allkem  Anglo American

Pay attention - limited upside

The 3 months correlation between Allkem and Anglo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Allkem 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 Allkem 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 Allkem 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 Allkem i.e., Allkem and Anglo American go up and down completely randomly.

Pair Corralation between Allkem and Anglo American

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

Allkem  vs.  Anglo American PLC

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.

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.

Pair Trading with Allkem and Anglo American

The main advantage of trading using opposite Allkem and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allkem 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 Allkem 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.