Correlation Between Anglo American and RMB Holdings

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

Diversification Opportunities for Anglo American and RMB Holdings

-0.64

Correlation Coefficient

Anglo American  RMB Holdings

Excellent diversification

The 3 months correlation between Anglo and RMB is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American Platinum and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Anglo American i.e., Anglo American and RMB Holdings go up and down completely randomly.

Pair Corralation between Anglo American and RMB Holdings

Assuming the 90 days trading horizon Anglo American Platinum is expected to under-perform the RMB Holdings. In addition to that, Anglo American is 1.05 times more volatile than RMB Holdings. It trades about -0.01 of its total potential returns per unit of risk. RMB Holdings is currently generating about -0.01 per unit of volatility. If you would invest  5,700  in RMB Holdings on October 5, 2024 and sell it today you would lose (1,300) from holding RMB Holdings or give up 22.81% of portfolio value over 90 days.

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

Anglo American Platinum  vs.  RMB 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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

RMB Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RMB Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Anglo American and RMB Holdings

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

The idea behind Anglo American Platinum and RMB 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.