Correlation Between Anglo American and Empress Royalty

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

Diversification Opportunities for Anglo American and Empress Royalty

0.63

Correlation Coefficient

Anglo American  Empress Royalty

Poor diversification

The 3 months correlation between Anglo and Empress is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Empress Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empress Royalty 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 Empress Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empress Royalty Corp has no effect on the direction of Anglo American i.e., Anglo American and Empress Royalty go up and down completely randomly.

Pair Corralation between Anglo American and Empress Royalty

Assuming the 90 days horizon Anglo American Platinum is expected to generate 0.95 times more return on investment than Empress Royalty. However, Anglo American Platinum is 1.05 times less risky than Empress Royalty. It trades about 0.02 of its potential returns per unit of risk. Empress Royalty Corp is currently generating about -0.05 per unit of risk. If you would invest  565.00  in Anglo American Platinum on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Anglo American Platinum or generate 0.53% 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.  Empress Royalty Corp

Anglo American Platinum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Anglo American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Empress Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empress Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Anglo American and Empress Royalty

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

The idea behind Anglo American Platinum and Empress Royalty 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.