Correlation Between Anglo American and Merit Group
Can any of the company-specific risk be diversified away by investing in both Anglo American and Merit Group 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 Merit Group 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 Merit Group PLC, you can compare the effects of market volatilities on Anglo American and Merit Group 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 Merit Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Merit Group.
Diversification Opportunities for Anglo American and Merit Group
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Anglo and Merit is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Merit Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Group 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 Merit Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Group PLC has no effect on the direction of Anglo American i.e., Anglo American and Merit Group go up and down completely randomly.
Pair Corralation between Anglo American and Merit Group
Assuming the 90 days trading horizon Anglo American PLC is expected to under-perform the Merit Group. But the stock apears to be less risky and, when comparing its historical volatility, Anglo American PLC is 1.29 times less risky than Merit Group. The stock trades about -0.01 of its potential returns per unit of risk. The Merit Group PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,400 in Merit Group PLC on August 26, 2024 and sell it today you would lose (100.00) from holding Merit Group PLC or give up 2.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American PLC vs. Merit Group PLC
Performance |
| Timeline |
| Anglo American PLC |
| Merit Group PLC |
Anglo American and Merit Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Merit Group
The main advantage of trading using opposite Anglo American and Merit Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Merit Group 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 Merit Group will offset losses from the drop in Merit Group's long position.| Anglo American vs. Fevertree Drinks Plc | Anglo American vs. Universal Music Group | Anglo American vs. Blackstone Loan Financing | Anglo American vs. Scandinavian Tobacco Group |
| Merit Group vs. Samsung Electronics Co | Merit Group vs. Samsung Electronics Co | Merit Group vs. Toyota Motor Corp | Merit Group vs. Reliance Industries Ltd |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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