Correlation Between Anglo American and Abingdon Health
Can any of the company-specific risk be diversified away by investing in both Anglo American and Abingdon Health 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 Abingdon Health 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 Abingdon Health Plc, you can compare the effects of market volatilities on Anglo American and Abingdon Health 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 Abingdon Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Abingdon Health.
Diversification Opportunities for Anglo American and Abingdon Health
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Anglo and Abingdon is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Abingdon Health Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abingdon Health Plc 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 Abingdon Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abingdon Health Plc has no effect on the direction of Anglo American i.e., Anglo American and Abingdon Health go up and down completely randomly.
Pair Corralation between Anglo American and Abingdon Health
Assuming the 90 days trading horizon Anglo American PLC is expected to generate 0.74 times more return on investment than Abingdon Health. However, Anglo American PLC is 1.36 times less risky than Abingdon Health. It trades about 0.03 of its potential returns per unit of risk. Abingdon Health Plc is currently generating about -0.01 per unit of risk. If you would invest 214,114 in Anglo American PLC on August 26, 2024 and sell it today you would earn a total of 21,786 from holding Anglo American PLC or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American PLC vs. Abingdon Health Plc
Performance |
| Timeline |
| Anglo American PLC |
| Abingdon Health Plc |
Anglo American and Abingdon Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Abingdon Health
The main advantage of trading using opposite Anglo American and Abingdon Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Abingdon Health 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 Abingdon Health will offset losses from the drop in Abingdon Health's long position.| Anglo American vs. Givaudan SA | Anglo American vs. Antofagasta PLC | Anglo American vs. Centamin PLC | Anglo American vs. Atalaya Mining |
| Abingdon Health vs. Admiral Group PLC | Abingdon Health vs. Anglo American PLC | Abingdon Health vs. Vodafone Group PLC | Abingdon Health vs. Caffyns PLC |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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