Correlation Between E Media and Anglo American

Can any of the company-specific risk be diversified away by investing in both E Media and Anglo American 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 E Media and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E Media Holdings and Anglo American Platinum, you can compare the effects of market volatilities on E Media and Anglo American 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 E Media with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and Anglo American.

Diversification Opportunities for E Media and Anglo American

-0.25

Correlation Coefficient

E Media  Anglo American

Very good diversification

The 3 months correlation between EMH and Anglo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and Anglo American Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American Platinum and E Media 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 E Media Holdings are associated (or correlated) with Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American Platinum has no effect on the direction of E Media i.e., E Media and Anglo American go up and down completely randomly.

Pair Corralation between E Media and Anglo American

Assuming the 90 days trading horizon E Media is expected to generate 10.04 times less return on investment than Anglo American. In addition to that, E Media is 1.21 times more volatile than Anglo American Platinum. It trades about 0.01 of its total potential returns per unit of risk. Anglo American Platinum is currently generating about 0.15 per unit of volatility. If you would invest  5,766,300  in Anglo American Platinum on December 22, 2024 and sell it today you would earn a total of  1,480,600  from holding Anglo American Platinum or generate 25.68% return on investment over 90 days.

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

E Media Holdings  vs.  Anglo American Platinum

E Media Holdings

Risk-Adjusted Performance

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.

Anglo American Platinum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Anglo American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Media and Anglo American

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

The idea behind E Media Holdings and Anglo American Platinum 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.