Correlation Between Anglo American and E Media

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

Diversification Opportunities for Anglo American and E Media

0.07

Correlation Coefficient

Anglo American  E Media

Significant diversification

The 3 months correlation between Anglo and EMH is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and E Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Media Holdings 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 E Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Media Holdings has no effect on the direction of Anglo American i.e., Anglo American and E Media go up and down completely randomly.

Pair Corralation between Anglo American and E Media

Assuming the 90 days trading horizon Anglo American Platinum is expected to generate 1.32 times more return on investment than E Media. However, Anglo American is 1.32 times more volatile than E Media Holdings. It trades about 0.04 of its potential returns per unit of risk. E Media Holdings is currently generating about -0.03 per unit of risk. If you would invest  5,675,000  in Anglo American Platinum on September 18, 2024 and sell it today you would earn a total of  236,800  from holding Anglo American Platinum or generate 4.17% return on investment over 90 days.

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

Anglo American Platinum  vs.  E Media Holdings

Anglo American Platinum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Anglo American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

E Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, E Media is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Anglo American and E Media

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

The idea behind Anglo American Platinum and E Media Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.