Correlation Between Primary Health and Antofagasta PLC

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

By analyzing existing cross correlation between Primary Health Properties and Antofagasta PLC, you can compare the effects of market volatilities on Primary Health and Antofagasta PLC 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 Primary Health with a short position of Antofagasta PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primary Health and Antofagasta PLC.

Diversification Opportunities for Primary Health and Antofagasta PLC

0.38

Correlation Coefficient

Primary Health  Antofagasta PLC

Weak diversification

The 3 months correlation between Primary and Antofagasta is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Antofagasta PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta PLC and Primary Health 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 Primary Health Properties are associated (or correlated) with Antofagasta PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta PLC has no effect on the direction of Primary Health i.e., Primary Health and Antofagasta PLC go up and down completely randomly.

Pair Corralation between Primary Health and Antofagasta PLC

Assuming the 90 days trading horizon Primary Health is expected to generate 4.05 times less return on investment than Antofagasta PLC. But when comparing it to its historical volatility, Primary Health Properties is 1.56 times less risky than Antofagasta PLC. It trades about 0.04 of its potential returns per unit of risk. Antofagasta PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  161,900  in Antofagasta PLC on December 25, 2024 and sell it today you would earn a total of  24,800  from holding Antofagasta PLC or generate 15.32% return on investment over 90 days.

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

Primary Health Properties  vs.  Antofagasta PLC

Primary Health Properties

Risk-Adjusted Performance

Insignificant

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

Antofagasta PLC

Risk-Adjusted Performance

OK

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

Pair Trading with Primary Health and Antofagasta PLC

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

The idea behind Primary Health Properties and Antofagasta PLC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.