Correlation Between AngloGold Ashanti and Freeport McMoran
Can any of the company-specific risk be diversified away by investing in both AngloGold Ashanti and Freeport McMoran 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 AngloGold Ashanti and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AngloGold Ashanti plc and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on AngloGold Ashanti and Freeport McMoran 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 AngloGold Ashanti with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of AngloGold Ashanti and Freeport McMoran.
Diversification Opportunities for AngloGold Ashanti and Freeport McMoran
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AngloGold and Freeport is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and AngloGold Ashanti 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 AngloGold Ashanti plc are associated (or correlated) with Freeport McMoran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoran Copper has no effect on the direction of AngloGold Ashanti i.e., AngloGold Ashanti and Freeport McMoran go up and down completely randomly.
Pair Corralation between AngloGold Ashanti and Freeport McMoran
Allowing for the 90-day total investment horizon AngloGold Ashanti is expected to generate 1.98 times less return on investment than Freeport McMoran. In addition to that, AngloGold Ashanti is 1.68 times more volatile than Freeport McMoran Copper Gold. It trades about 0.06 of its total potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.2 per unit of volatility. If you would invest 4,522 in Freeport McMoran Copper Gold on January 25, 2024 and sell it today you would earn a total of 302.00 from holding Freeport McMoran Copper Gold or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AngloGold Ashanti plc vs. Freeport McMoran Copper Gold
Performance |
| Timeline |
| AngloGold Ashanti plc |
| Freeport McMoran Copper |
AngloGold Ashanti and Freeport McMoran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AngloGold Ashanti and Freeport McMoran
The main advantage of trading using opposite AngloGold Ashanti and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AngloGold Ashanti position performs unexpectedly, Freeport McMoran 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 Freeport McMoran will offset losses from the drop in Freeport McMoran's long position.The idea behind AngloGold Ashanti plc and Freeport McMoran Copper Gold 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.| Freeport McMoran vs. Ero Copper Corp | Freeport McMoran vs. Taseko Mines | Freeport McMoran vs. Metals Acquisition Limited | Freeport McMoran vs. Hecla Mining |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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