Correlation Between Kumba Iron and Dipula Income

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Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Dipula Income 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 Dipula Income 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 Dipula Income, you can compare the effects of market volatilities on Kumba Iron and Dipula Income 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 Dipula Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Dipula Income.

Diversification Opportunities for Kumba Iron and Dipula Income

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Kumba and Dipula is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Dipula Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dipula Income 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 Dipula Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dipula Income has no effect on the direction of Kumba Iron i.e., Kumba Iron and Dipula Income go up and down completely randomly.

Pair Corralation between Kumba Iron and Dipula Income

Assuming the 90 days trading horizon Kumba Iron Ore is expected to under-perform the Dipula Income. In addition to that, Kumba Iron is 1.2 times more volatile than Dipula Income. It trades about -0.09 of its total potential returns per unit of risk. Dipula Income is currently generating about 0.12 per unit of volatility. If you would invest  39,800  in Dipula Income on September 14, 2024 and sell it today you would earn a total of  12,200  from holding Dipula Income or generate 30.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kumba Iron Ore  vs.  Dipula Income

 Performance 
       Timeline  
Kumba Iron Ore 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kumba Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kumba Iron is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Dipula Income 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dipula Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Dipula Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kumba Iron and Dipula Income Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kumba Iron and Dipula Income

The main advantage of trading using opposite Kumba Iron and Dipula Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Dipula Income 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 Dipula Income will offset losses from the drop in Dipula Income's long position.
The idea behind Kumba Iron Ore and Dipula Income 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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