Correlation Between Anglo American and Telkom

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

Diversification Opportunities for Anglo American and Telkom

-0.39

Correlation Coefficient

Anglo American  Telkom

Very good diversification

The 3 months correlation between Anglo and Telkom is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Telkom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom 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 Telkom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom has no effect on the direction of Anglo American i.e., Anglo American and Telkom go up and down completely randomly.

Pair Corralation between Anglo American and Telkom

Assuming the 90 days trading horizon Anglo American Platinum is expected to under-perform the Telkom. But the stock apears to be less risky and, when comparing its historical volatility, Anglo American Platinum is 1.09 times less risky than Telkom. The stock trades about -0.16 of its potential returns per unit of risk. The Telkom is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest  270,000  in Telkom on September 13, 2024 and sell it today you would earn a total of  85,400  from holding Telkom or generate 31.63% return on investment over 90 days.

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

Anglo American Platinum  vs.  Telkom

Anglo American Platinum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Anglo American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telkom

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Telkom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Telkom

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

The idea behind Anglo American Platinum and Telkom 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.