Correlation Between Anglo American and NTT DATA

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

Diversification Opportunities for Anglo American and NTT DATA

0.41

Correlation Coefficient

Anglo American  NTT DATA

Very weak diversification

The 3 months correlation between Anglo and NTT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American plc and NTT DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT DATA 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 NTT DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT DATA has no effect on the direction of Anglo American i.e., Anglo American and NTT DATA go up and down completely randomly.

Pair Corralation between Anglo American and NTT DATA

Assuming the 90 days trading horizon Anglo American plc is expected to under-perform the NTT DATA. In addition to that, Anglo American is 1.15 times more volatile than NTT DATA . It trades about 0.0 of its total potential returns per unit of risk. NTT DATA is currently generating about 0.24 per unit of volatility. If you would invest  1,570  in NTT DATA on October 7, 2024 and sell it today you would earn a total of  280.00  from holding NTT DATA or generate 17.83% 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.  NTT DATA

Anglo American plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American plc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

NTT DATA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NTT DATA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NTT DATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anglo American and NTT DATA

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

The idea behind Anglo American plc and NTT DATA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.