Correlation Between Anglo American and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Anglo American and HomeChoice Investments 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 HomeChoice Investments 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 HomeChoice Investments, you can compare the effects of market volatilities on Anglo American and HomeChoice Investments 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 HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and HomeChoice Investments.
Diversification Opportunities for Anglo American and HomeChoice Investments
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Anglo and HomeChoice is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments 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 HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Anglo American i.e., Anglo American and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Anglo American and HomeChoice Investments
Assuming the 90 days trading horizon Anglo American PLC is expected to generate 0.74 times more return on investment than HomeChoice Investments. However, Anglo American PLC is 1.36 times less risky than HomeChoice Investments. It trades about 0.1 of its potential returns per unit of risk. HomeChoice Investments is currently generating about -0.07 per unit of risk. If you would invest 4,943,000 in Anglo American PLC on September 17, 2024 and sell it today you would earn a total of 670,500 from holding Anglo American PLC or generate 13.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Anglo American PLC vs. HomeChoice Investments
Performance |
Timeline |
Anglo American PLC |
HomeChoice Investments |
Anglo American and HomeChoice Investments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Anglo American and HomeChoice Investments
The main advantage of trading using opposite Anglo American and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, HomeChoice Investments 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 HomeChoice Investments will offset losses from the drop in HomeChoice Investments' long position.Anglo American vs. HomeChoice Investments | Anglo American vs. Kap Industrial Holdings | Anglo American vs. Astral Foods | Anglo American vs. Reinet Investments SCA |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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