Correlation Between Rock Tech and Anglo American

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

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

Diversification Opportunities for Rock Tech and Anglo American

-0.27

Correlation Coefficient

Rock Tech  Anglo American

Very good diversification

The 3 months correlation between Rock and Anglo is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium 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 Rock Tech 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 Rock Tech Lithium 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 Rock Tech i.e., Rock Tech and Anglo American go up and down completely randomly.

Pair Corralation between Rock Tech and Anglo American

Assuming the 90 days trading horizon Rock Tech is expected to generate 9.25 times less return on investment than Anglo American. In addition to that, Rock Tech is 2.14 times more volatile than Anglo American plc. It trades about 0.0 of its total potential returns per unit of risk. Anglo American plc is currently generating about 0.06 per unit of volatility. If you would invest  2,051  in Anglo American plc on October 3, 2024 and sell it today you would earn a total of  782.00  from holding Anglo American plc or generate 38.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Rock Tech Lithium  vs.  Anglo American plc

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Anglo American plc

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental drivers, Anglo American is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rock Tech and Anglo American

The main advantage of trading using opposite Rock Tech and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rock Tech 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 Rock Tech Lithium 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.