Correlation Between S A P and AngloGold Ashanti

Can any of the company-specific risk be diversified away by investing in both S A P and AngloGold Ashanti 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 S A P and AngloGold Ashanti into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sappi and AngloGold Ashanti, you can compare the effects of market volatilities on S A P and AngloGold Ashanti 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 S A P with a short position of AngloGold Ashanti. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and AngloGold Ashanti.

Diversification Opportunities for S A P and AngloGold Ashanti

-0.26

Correlation Coefficient

S A P  AngloGold Ashanti

Very good diversification

The 3 months correlation between SAP and AngloGold is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sappi and AngloGold Ashanti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti and S A P 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 Sappi are associated (or correlated) with AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti has no effect on the direction of S A P i.e., S A P and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between S A P and AngloGold Ashanti

Assuming the 90 days trading horizon Sappi is expected to generate 0.87 times more return on investment than AngloGold Ashanti. However, Sappi is 1.15 times less risky than AngloGold Ashanti. It trades about 0.09 of its potential returns per unit of risk. AngloGold Ashanti is currently generating about -0.05 per unit of risk. If you would invest  455,600  in Sappi on September 5, 2024 and sell it today you would earn a total of  54,400  from holding Sappi or generate 11.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sappi  vs.  AngloGold Ashanti

Sappi

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Sappi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical and fundamental indicators, S A P exhibited solid returns over the last few months and may actually be approaching a breakup point.

AngloGold Ashanti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AngloGold Ashanti has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with S A P and AngloGold Ashanti

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

The idea behind Sappi and AngloGold Ashanti 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.