Correlation Between Investec Limited and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both Investec Limited 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 Investec Limited and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investec Limited NON and Kumba Iron Ore, you can compare the effects of market volatilities on Investec Limited 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 Investec Limited with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec Limited and Kumba Iron.
Diversification Opportunities for Investec Limited and Kumba Iron
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Investec and Kumba is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Investec Limited NON 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 Investec Limited 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 Investec Limited NON 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 Investec Limited i.e., Investec Limited and Kumba Iron go up and down completely randomly.
Pair Corralation between Investec Limited and Kumba Iron
Assuming the 90 days trading horizon Investec Limited NON is expected to generate 0.48 times more return on investment than Kumba Iron. However, Investec Limited NON is 2.1 times less risky than Kumba Iron. It trades about 0.01 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 919,780 in Investec Limited NON on September 4, 2024 and sell it today you would lose (4,780) from holding Investec Limited NON or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investec Limited NON vs. Kumba Iron Ore
Performance |
| Timeline |
| Investec Limited NON |
| Kumba Iron Ore |
Investec Limited and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investec Limited and Kumba Iron
The main advantage of trading using opposite Investec Limited and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Limited 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.| Investec Limited vs. Frontier Transport Holdings | Investec Limited vs. Bytes Technology | Investec Limited vs. Brimstone Investment | Investec Limited vs. AfroCentric Investment Corp |
| Kumba Iron vs. Trematon Capital Investments | Kumba Iron vs. Safari Investments RSA | Kumba Iron vs. AfroCentric Investment Corp | Kumba Iron vs. eMedia Holdings Limited |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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