Correlation Between Snow Lake and Anglo American

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

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

Diversification Opportunities for Snow Lake and Anglo American

-0.16

Correlation Coefficient

Snow Lake  Anglo American

Good diversification

The 3 months correlation between Snow and Anglo is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Snow Lake Resources 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 Snow Lake 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 Snow Lake Resources 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 Snow Lake i.e., Snow Lake and Anglo American go up and down completely randomly.

Pair Corralation between Snow Lake and Anglo American

Given the investment horizon of 90 days Snow Lake Resources is expected to under-perform the Anglo American. In addition to that, Snow Lake is 2.33 times more volatile than Anglo American PLC. It trades about -0.15 of its total potential returns per unit of risk. Anglo American PLC is currently generating about 0.09 per unit of volatility. If you would invest  1,395  in Anglo American PLC on September 15, 2024 and sell it today you would earn a total of  200.00  from holding Anglo American PLC or generate 14.34% return on investment over 90 days.

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

Snow Lake Resources  vs.  Anglo American PLC

Snow Lake Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snow Lake Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Anglo American PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Anglo American showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Snow Lake and Anglo American

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

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