Correlation Between Hammerson PLC and Pan African

Can any of the company-specific risk be diversified away by investing in both Hammerson PLC and Pan African 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 Hammerson PLC and Pan African into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hammerson PLC and Pan African Resources, you can compare the effects of market volatilities on Hammerson PLC and Pan African 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 Hammerson PLC with a short position of Pan African. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hammerson PLC and Pan African.

Diversification Opportunities for Hammerson PLC and Pan African

0.69

Correlation Coefficient

Hammerson PLC  Pan African

Poor diversification

The 3 months correlation between Hammerson and Pan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hammerson PLC and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources and Hammerson PLC 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 Hammerson PLC are associated (or correlated) with Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of Hammerson PLC i.e., Hammerson PLC and Pan African go up and down completely randomly.

Pair Corralation between Hammerson PLC and Pan African

Assuming the 90 days trading horizon Hammerson PLC is expected to generate 45.65 times more return on investment than Pan African. However, Hammerson PLC is 45.65 times more volatile than Pan African Resources. It trades about 0.13 of its potential returns per unit of risk. Pan African Resources is currently generating about 0.09 per unit of risk. If you would invest  66,600  in Hammerson PLC on September 1, 2024 and sell it today you would earn a total of  602,000  from holding Hammerson PLC or generate 903.9% return on investment over 90 days.

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

Hammerson PLC  vs.  Pan African Resources

Hammerson PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hammerson PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hammerson PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pan African Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pan African Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pan African exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hammerson PLC and Pan African

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

The idea behind Hammerson PLC and Pan African Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.