Correlation Between Anglo American and Data3

Can any of the company-specific risk be diversified away by investing in both Anglo American and Data3 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 Data3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anglo American plc and Data3 Limited, you can compare the effects of market volatilities on Anglo American and Data3 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 Data3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Data3.

Diversification Opportunities for Anglo American and Data3

-0.12

Correlation Coefficient

Anglo American  Data3

Good diversification

The 3 months correlation between Anglo and Data3 is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited 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 plc are associated (or correlated) with Data3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of Anglo American i.e., Anglo American and Data3 go up and down completely randomly.

Pair Corralation between Anglo American and Data3

Assuming the 90 days trading horizon Anglo American is expected to generate 4.33 times less return on investment than Data3. In addition to that, Anglo American is 1.05 times more volatile than Data3 Limited. It trades about 0.03 of its total potential returns per unit of risk. Data3 Limited is currently generating about 0.14 per unit of volatility. If you would invest  367.00  in Data3 Limited on December 28, 2024 and sell it today you would earn a total of  67.00  from holding Data3 Limited or generate 18.26% return on investment over 90 days.

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

Anglo American plc  vs.  Data3 Limited

Anglo American plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Anglo American is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Data3 Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Data3 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Data3

The main advantage of trading using opposite Anglo American and Data3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American position performs unexpectedly, Data3 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 Data3 will offset losses from the drop in Data3's long position.

The idea behind Anglo American plc and Data3 Limited 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.