Correlation Between AngloGold Ashanti and Nucor Corp

Can any of the company-specific risk be diversified away by investing in both AngloGold Ashanti and Nucor Corp 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 Nucor Corp 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 Nucor Corp, you can compare the effects of market volatilities on AngloGold Ashanti and Nucor Corp 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 Nucor Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AngloGold Ashanti and Nucor Corp.

Diversification Opportunities for AngloGold Ashanti and Nucor Corp

0.15

Correlation Coefficient

AngloGold Ashanti  Nucor Corp

Average diversification

The 3 months correlation between AngloGold and Nucor is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp 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 Nucor Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor Corp has no effect on the direction of AngloGold Ashanti i.e., AngloGold Ashanti and Nucor Corp go up and down completely randomly.

Pair Corralation between AngloGold Ashanti and Nucor Corp

Allowing for the 90-day total investment horizon AngloGold Ashanti plc is expected to generate 1.48 times more return on investment than Nucor Corp. However, AngloGold Ashanti is 1.48 times more volatile than Nucor Corp. It trades about -0.03 of its potential returns per unit of risk. Nucor Corp is currently generating about -0.29 per unit of risk. If you would invest  2,395  in AngloGold Ashanti plc on February 5, 2024 and sell it today you would lose (83.00) from holding AngloGold Ashanti plc or give up 3.47% of portfolio value over 90 days.

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

AngloGold Ashanti plc  vs.  Nucor Corp

AngloGold Ashanti plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AngloGold Ashanti unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nucor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nucor Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AngloGold Ashanti and Nucor Corp

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

The idea behind AngloGold Ashanti plc and Nucor Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.