Correlation Between Anglo American and Life Healthcare
Can any of the company-specific risk be diversified away by investing in both Anglo American and Life Healthcare 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 Life Healthcare 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 Life Healthcare, you can compare the effects of market volatilities on Anglo American and Life Healthcare 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 Life Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Life Healthcare.
Diversification Opportunities for Anglo American and Life Healthcare
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Anglo and Life is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Life Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare 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 Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare has no effect on the direction of Anglo American i.e., Anglo American and Life Healthcare go up and down completely randomly.
Pair Corralation between Anglo American and Life Healthcare
Assuming the 90 days trading horizon Anglo American Platinum is expected to under-perform the Life Healthcare. In addition to that, Anglo American is 1.43 times more volatile than Life Healthcare. It trades about -0.04 of its total potential returns per unit of risk. Life Healthcare is currently generating about 0.02 per unit of volatility. If you would invest 166,287 in Life Healthcare on August 28, 2024 and sell it today you would earn a total of 10,313 from holding Life Healthcare or generate 6.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anglo American Platinum vs. Life Healthcare
Performance |
| Timeline |
| Anglo American Platinum |
| Life Healthcare |
Anglo American and Life Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Life Healthcare
The main advantage of trading using opposite Anglo American and Life Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Life Healthcare 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 Life Healthcare will offset losses from the drop in Life Healthcare's long position.| Anglo American vs. CA Sales Holdings | Anglo American vs. Life Healthcare | Anglo American vs. Afine Investments | Anglo American vs. E Media Holdings |
| Life Healthcare vs. Kap Industrial Holdings | Life Healthcare vs. City Lodge Hotels | Life Healthcare vs. Harmony Gold Mining | Life Healthcare vs. CA Sales Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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