Correlation Between African Rainbow and Anglo American

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

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

Diversification Opportunities for African Rainbow and Anglo American

0.1

Correlation Coefficient

African Rainbow  Anglo American

Average diversification

The 3 months correlation between African and Anglo is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals 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 African Rainbow 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 African Rainbow Minerals 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 African Rainbow i.e., African Rainbow and Anglo American go up and down completely randomly.

Pair Corralation between African Rainbow and Anglo American

If you would invest  2,799  in Anglo American plc on September 22, 2024 and sell it today you would earn a total of  153.00  from holding Anglo American plc or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

African Rainbow Minerals  vs.  Anglo American plc

African Rainbow Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Rainbow Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, African Rainbow 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Anglo American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with African Rainbow and Anglo American

The main advantage of trading using opposite African Rainbow and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow 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 African Rainbow Minerals 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.