Correlation Between African Rainbow and Kore Potash
Can any of the company-specific risk be diversified away by investing in both African Rainbow and Kore Potash 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 African Rainbow and Kore Potash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Rainbow Minerals and Kore Potash Plc, you can compare the effects of market volatilities on African Rainbow and Kore Potash 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 African Rainbow with a short position of Kore Potash. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Rainbow and Kore Potash.
Diversification Opportunities for African Rainbow and Kore Potash
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between African and Kore is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals and Kore Potash Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kore Potash Plc and African Rainbow 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 African Rainbow Minerals are associated (or correlated) with Kore Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kore Potash Plc has no effect on the direction of African Rainbow i.e., African Rainbow and Kore Potash go up and down completely randomly.
Pair Corralation between African Rainbow and Kore Potash
Assuming the 90 days trading horizon African Rainbow Minerals is expected to under-perform the Kore Potash. But the stock apears to be less risky and, when comparing its historical volatility, African Rainbow Minerals is 2.63 times less risky than Kore Potash. The stock trades about -0.11 of its potential returns per unit of risk. The Kore Potash Plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,000 in Kore Potash Plc on September 3, 2024 and sell it today you would earn a total of 1,300 from holding Kore Potash Plc or generate 26.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Rainbow Minerals vs. Kore Potash Plc
Performance |
| Timeline |
| African Rainbow Minerals |
| Kore Potash Plc |
African Rainbow and Kore Potash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Rainbow and Kore Potash
The main advantage of trading using opposite African Rainbow and Kore Potash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow position performs unexpectedly, Kore Potash 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 Kore Potash will offset losses from the drop in Kore Potash's long position.| African Rainbow vs. Zeder Investments | African Rainbow vs. We Buy Cars | African Rainbow vs. Harmony Gold Mining | African Rainbow vs. Kap Industrial Holdings |
| Kore Potash vs. Glencore PLC | Kore Potash vs. Anglo American PLC | Kore Potash vs. African Rainbow Minerals | Kore Potash vs. Jubilee Platinum |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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