Correlation Between Life Healthcare and AngloGold Ashanti

Can any of the company-specific risk be diversified away by investing in both Life Healthcare and AngloGold Ashanti 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 Life Healthcare and AngloGold Ashanti into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Life Healthcare and AngloGold Ashanti, you can compare the effects of market volatilities on Life Healthcare and AngloGold Ashanti 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 Life Healthcare with a short position of AngloGold Ashanti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and AngloGold Ashanti.

Diversification Opportunities for Life Healthcare and AngloGold Ashanti

0.09

Correlation Coefficient

Life Healthcare  AngloGold Ashanti

Significant diversification

The 3 months correlation between Life and AngloGold is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and AngloGold Ashanti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti and Life Healthcare 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 Life Healthcare are associated (or correlated) with AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti has no effect on the direction of Life Healthcare i.e., Life Healthcare and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between Life Healthcare and AngloGold Ashanti

Assuming the 90 days trading horizon Life Healthcare is expected to under-perform the AngloGold Ashanti. But the stock apears to be less risky and, when comparing its historical volatility, Life Healthcare is 2.21 times less risky than AngloGold Ashanti. The stock trades about -0.37 of its potential returns per unit of risk. The AngloGold Ashanti is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,614,000  in AngloGold Ashanti on October 11, 2024 and sell it today you would earn a total of  286,000  from holding AngloGold Ashanti or generate 6.2% return on investment over 90 days.

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

Life Healthcare  vs.  AngloGold Ashanti

Life Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Healthcare 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.

AngloGold Ashanti

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, AngloGold Ashanti is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Life Healthcare and AngloGold Ashanti

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

The idea behind Life Healthcare and AngloGold Ashanti 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.