Correlation Between Anglo American and AbraSilver Resource

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

By analyzing existing cross correlation between Anglo American Platinum and AbraSilver Resource Corp, you can compare the effects of market volatilities on Anglo American and AbraSilver Resource 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 AbraSilver Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and AbraSilver Resource.

Diversification Opportunities for Anglo American and AbraSilver Resource

0.67

Correlation Coefficient

Anglo American  AbraSilver Resource

Poor diversification

The 3 months correlation between Anglo and AbraSilver is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and AbraSilver Resource Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbraSilver Resource Corp 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 Platinum are associated (or correlated) with AbraSilver Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbraSilver Resource Corp has no effect on the direction of Anglo American i.e., Anglo American and AbraSilver Resource go up and down completely randomly.

Pair Corralation between Anglo American and AbraSilver Resource

Assuming the 90 days horizon Anglo American Platinum is expected to under-perform the AbraSilver Resource. In addition to that, Anglo American is 1.32 times more volatile than AbraSilver Resource Corp. It trades about -0.01 of its total potential returns per unit of risk. AbraSilver Resource Corp is currently generating about 0.1 per unit of volatility. If you would invest  163.00  in AbraSilver Resource Corp on September 2, 2024 and sell it today you would earn a total of  33.00  from holding AbraSilver Resource Corp or generate 20.25% return on investment over 90 days.

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

Anglo American Platinum  vs.  AbraSilver Resource Corp

Anglo American Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Anglo American is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AbraSilver Resource Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AbraSilver Resource Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AbraSilver Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and AbraSilver Resource

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

The idea behind Anglo American Platinum and AbraSilver Resource Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.