Correlation Between Anglo American and HEMISPHERE EGY

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

Diversification Opportunities for Anglo American and HEMISPHERE EGY

0.67

Correlation Coefficient

Anglo American  HEMISPHERE EGY

Poor diversification

The 3 months correlation between Anglo and HEMISPHERE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY 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 HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of Anglo American i.e., Anglo American and HEMISPHERE EGY go up and down completely randomly.

Pair Corralation between Anglo American and HEMISPHERE EGY

Assuming the 90 days trading horizon Anglo American plc is expected to generate 1.43 times more return on investment than HEMISPHERE EGY. However, Anglo American is 1.43 times more volatile than HEMISPHERE EGY. It trades about 0.15 of its potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.1 per unit of risk. If you would invest  2,493  in Anglo American plc on September 14, 2024 and sell it today you would earn a total of  590.00  from holding Anglo American plc or generate 23.67% return on investment over 90 days.

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

Anglo American plc  vs.  HEMISPHERE EGY

Anglo American plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Anglo American reported solid returns over the last few months and may actually be approaching a breakup point.

HEMISPHERE EGY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEMISPHERE EGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Anglo American and HEMISPHERE EGY

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

The idea behind Anglo American plc and HEMISPHERE EGY 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.