Correlation Between Kumba Iron and Blue Label
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Blue Label 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 Kumba Iron and Blue Label into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kumba Iron Ore and Blue Label Telecoms, you can compare the effects of market volatilities on Kumba Iron and Blue Label 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 Kumba Iron with a short position of Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Blue Label.
Diversification Opportunities for Kumba Iron and Blue Label
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kumba and Blue is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms and Kumba Iron 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 Kumba Iron Ore are associated (or correlated) with Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of Kumba Iron i.e., Kumba Iron and Blue Label go up and down completely randomly.
Pair Corralation between Kumba Iron and Blue Label
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 0.97 times more return on investment than Blue Label. However, Kumba Iron Ore is 1.03 times less risky than Blue Label. It trades about 0.41 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.04 per unit of risk. If you would invest 3,220,000 in Kumba Iron Ore on October 24, 2024 and sell it today you would earn a total of 415,000 from holding Kumba Iron Ore or generate 12.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumba Iron Ore vs. Blue Label Telecoms
Performance |
| Timeline |
| Kumba Iron Ore |
| Blue Label Telecoms |
Kumba Iron and Blue Label Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and Blue Label
The main advantage of trading using opposite Kumba Iron and Blue Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Blue Label 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 Blue Label will offset losses from the drop in Blue Label's long position.| Kumba Iron vs. Bytes Technology | Kumba Iron vs. ABSA Bank Limited | Kumba Iron vs. Frontier Transport Holdings | Kumba Iron vs. Hosken Consolidated Investments |
| Blue Label vs. Boxer Retail | Blue Label vs. HomeChoice Investments | Blue Label vs. Safari Investments RSA | Blue Label vs. Nedbank Group |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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