Correlation Between Anglo American and Alien Metals

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

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

Diversification Opportunities for Anglo American and Alien Metals

-0.51

Correlation Coefficient

Anglo American  Alien Metals

Excellent diversification

The 3 months correlation between Anglo and Alien is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals 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 Platinum are associated (or correlated) with Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Anglo American i.e., Anglo American and Alien Metals go up and down completely randomly.

Pair Corralation between Anglo American and Alien Metals

Assuming the 90 days horizon Anglo American Platinum is expected to under-perform the Alien Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Anglo American Platinum is 24.64 times less risky than Alien Metals. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Alien Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Alien Metals on January 24, 2024 and sell it today you would lose (1.87) from holding Alien Metals or give up 93.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Anglo American Platinum  vs.  Alien Metals

Anglo American Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alien Metals

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Anglo American and Alien Metals

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

The idea behind Anglo American Platinum and Alien Metals 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..