Correlation Between Sage Group and Anglo Asian

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

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

Diversification Opportunities for Sage Group and Anglo Asian

-0.38

Correlation Coefficient

Sage Group  Anglo Asian

Very good diversification

The 3 months correlation between Sage and Anglo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sage Group PLC and Anglo Asian Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo Asian Mining and Sage Group 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 Sage Group PLC are associated (or correlated) with Anglo Asian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo Asian Mining has no effect on the direction of Sage Group i.e., Sage Group and Anglo Asian go up and down completely randomly.

Pair Corralation between Sage Group and Anglo Asian

Assuming the 90 days trading horizon Sage Group PLC is expected to under-perform the Anglo Asian. But the stock apears to be less risky and, when comparing its historical volatility, Sage Group PLC is 3.23 times less risky than Anglo Asian. The stock trades about -0.12 of its potential returns per unit of risk. The Anglo Asian Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,800  in Anglo Asian Mining on December 22, 2024 and sell it today you would earn a total of  1,050  from holding Anglo Asian Mining or generate 9.72% return on investment over 90 days.

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

Sage Group PLC  vs.  Anglo Asian Mining

Sage Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sage Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Anglo Asian Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo Asian Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Anglo Asian may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sage Group and Anglo Asian

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

The idea behind Sage Group PLC and Anglo Asian Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.