Correlation Between Anglo American and Identiv

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

Diversification Opportunities for Anglo American and Identiv

0.49

Correlation Coefficient

Anglo American  Identiv

Very weak diversification

The 3 months correlation between Anglo and Identiv is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv 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 Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of Anglo American i.e., Anglo American and Identiv go up and down completely randomly.

Pair Corralation between Anglo American and Identiv

Assuming the 90 days trading horizon Anglo American is expected to generate 2.63 times less return on investment than Identiv. But when comparing it to its historical volatility, Anglo American plc is 1.31 times less risky than Identiv. It trades about 0.04 of its potential returns per unit of risk. Identiv is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Identiv on October 8, 2024 and sell it today you would earn a total of  41.00  from holding Identiv or generate 13.23% return on investment over 90 days.

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

Anglo American plc  vs.  Identiv

Anglo American plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Anglo American is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Identiv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Identiv are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Identiv reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and Identiv

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

The idea behind Anglo American plc and Identiv 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.