Correlation Between Anglo American and Pepkor Holdings

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

Diversification Opportunities for Anglo American and Pepkor Holdings

-0.33

Correlation Coefficient

Anglo American  Pepkor Holdings

Very good diversification

The 3 months correlation between Anglo and Pepkor is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and Pepkor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepkor 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 Pepkor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepkor Holdings has no effect on the direction of Anglo American i.e., Anglo American and Pepkor Holdings go up and down completely randomly.

Pair Corralation between Anglo American and Pepkor Holdings

Assuming the 90 days trading horizon Anglo American is expected to generate 136.99 times less return on investment than Pepkor Holdings. But when comparing it to its historical volatility, Anglo American Platinum is 119.59 times less risky than Pepkor Holdings. It trades about 0.18 of its potential returns per unit of risk. Pepkor Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  284,846  in Pepkor Holdings on October 26, 2024 and sell it today you would lose (23,246) from holding Pepkor Holdings or give up 8.16% of portfolio value over 90 days.

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

Anglo American Platinum  vs.  Pepkor Holdings

Anglo American Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pepkor Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Pepkor Holdings

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

The idea behind Anglo American Platinum and Pepkor 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..