Correlation Between Anfield Resources and Aura Energy

Can any of the company-specific risk be diversified away by investing in both Anfield Resources and Aura Energy 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 Anfield Resources and Aura Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anfield Resources and Aura Energy Limited, you can compare the effects of market volatilities on Anfield Resources and Aura Energy 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 Anfield Resources with a short position of Aura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anfield Resources and Aura Energy.

Diversification Opportunities for Anfield Resources and Aura Energy

0.11

Correlation Coefficient

Anfield Resources  Aura Energy

Average diversification

The 3 months correlation between Anfield and Aura is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Anfield Resources and Aura Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Energy Limited and Anfield Resources 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 Anfield Resources are associated (or correlated) with Aura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Energy Limited has no effect on the direction of Anfield Resources i.e., Anfield Resources and Aura Energy go up and down completely randomly.

Pair Corralation between Anfield Resources and Aura Energy

Assuming the 90 days horizon Anfield Resources is expected to generate 1.4 times less return on investment than Aura Energy. But when comparing it to its historical volatility, Anfield Resources is 1.53 times less risky than Aura Energy. It trades about 0.08 of its potential returns per unit of risk. Aura Energy Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Aura Energy Limited on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Aura Energy Limited or generate 11.11% return on investment over 90 days.

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

Anfield Resources  vs.  Aura Energy Limited

Anfield Resources

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anfield Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Anfield Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Aura Energy Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anfield Resources and Aura Energy

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

The idea behind Anfield Resources and Aura Energy Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.