Correlation Between HomeChoice Investments and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both HomeChoice Investments and Kumba Iron 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 HomeChoice Investments and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HomeChoice Investments and Kumba Iron Ore, you can compare the effects of market volatilities on HomeChoice Investments and Kumba Iron 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 HomeChoice Investments with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeChoice Investments and Kumba Iron.
Diversification Opportunities for HomeChoice Investments and Kumba Iron
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between HomeChoice and Kumba is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Kumba Iron go up and down completely randomly.
Pair Corralation between HomeChoice Investments and Kumba Iron
Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 1.06 times more return on investment than Kumba Iron. However, HomeChoice Investments is 1.06 times more volatile than Kumba Iron Ore. It trades about 0.04 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.01 per unit of risk. If you would invest 241,738 in HomeChoice Investments on August 24, 2024 and sell it today you would earn a total of 113,262 from holding HomeChoice Investments or generate 46.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HomeChoice Investments vs. Kumba Iron Ore
Performance |
| Timeline |
| HomeChoice Investments |
| Kumba Iron Ore |
HomeChoice Investments and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HomeChoice Investments and Kumba Iron
The main advantage of trading using opposite HomeChoice Investments and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeChoice Investments position performs unexpectedly, Kumba Iron 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 Kumba Iron will offset losses from the drop in Kumba Iron's long position.| HomeChoice Investments vs. Safari Investments RSA | HomeChoice Investments vs. Standard Bank Group | HomeChoice Investments vs. Zeder Investments | HomeChoice Investments vs. City Lodge Hotels |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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