Correlation Between Anglo American and Indutrade

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

Diversification Opportunities for Anglo American and Indutrade

-0.14

Correlation Coefficient

Anglo American  Indutrade

Good diversification

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

Pair Corralation between Anglo American and Indutrade

Assuming the 90 days trading horizon Anglo American PLC is expected to under-perform the Indutrade. In addition to that, Anglo American is 1.24 times more volatile than Indutrade AB. It trades about -0.01 of its total potential returns per unit of risk. Indutrade AB is currently generating about 0.1 per unit of volatility. If you would invest  26,540  in Indutrade AB on September 22, 2024 and sell it today you would earn a total of  800.00  from holding Indutrade AB or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Anglo American PLC  vs.  Indutrade AB

Anglo American PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC 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 American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Anglo American and Indutrade

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

The idea behind Anglo American PLC and Indutrade AB 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.