Correlation Between Anglo American and CITIC Resources

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

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

Diversification Opportunities for Anglo American and CITIC Resources

0.06

Correlation Coefficient

Anglo American  CITIC Resources

Significant diversification

The 3 months correlation between Anglo and CITIC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and CITIC Resources Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Resources Holdings 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 PLC are associated (or correlated) with CITIC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Resources Holdings has no effect on the direction of Anglo American i.e., Anglo American and CITIC Resources go up and down completely randomly.

Pair Corralation between Anglo American and CITIC Resources

If you would invest  1,417  in Anglo American PLC on September 22, 2024 and sell it today you would earn a total of  52.00  from holding Anglo American PLC or generate 3.67% return on investment over 90 days.

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

Anglo American PLC  vs.  CITIC Resources Holdings

Anglo American PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 2 (%) 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.

CITIC Resources Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Anglo American and CITIC Resources

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

The idea behind Anglo American PLC and CITIC Resources Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.