Correlation Between Anglo American and Dennys Corp

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

Diversification Opportunities for Anglo American and Dennys Corp

-0.05

Correlation Coefficient

Anglo American  Dennys Corp

Good diversification

The 3 months correlation between Anglo and Dennys is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp 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 Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of Anglo American i.e., Anglo American and Dennys Corp go up and down completely randomly.

Pair Corralation between Anglo American and Dennys Corp

Assuming the 90 days horizon Anglo American Platinum is expected to generate 1.24 times more return on investment than Dennys Corp. However, Anglo American is 1.24 times more volatile than Dennys Corp. It trades about 0.08 of its potential returns per unit of risk. Dennys Corp is currently generating about -0.12 per unit of risk. If you would invest  3,098  in Anglo American Platinum on December 19, 2024 and sell it today you would earn a total of  569.00  from holding Anglo American Platinum or generate 18.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.83%
Values	Daily Returns

Anglo American Platinum  vs.  Dennys Corp

Anglo American Platinum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Anglo American reported solid returns over the last few months and may actually be approaching a breakup point.

Dennys Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Anglo American and Dennys Corp

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

The idea behind Anglo American Platinum and Dennys Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.