Correlation Between Kumba Iron and EnX
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and EnX 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 EnX 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 enX Group, you can compare the effects of market volatilities on Kumba Iron and EnX 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 EnX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and EnX.
Diversification Opportunities for Kumba Iron and EnX
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Kumba and EnX is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and enX Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on enX Group 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 EnX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of enX Group has no effect on the direction of Kumba Iron i.e., Kumba Iron and EnX go up and down completely randomly.
Pair Corralation between Kumba Iron and EnX
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 1.03 times more return on investment than EnX. However, Kumba Iron is 1.03 times more volatile than enX Group. It trades about 0.07 of its potential returns per unit of risk. enX Group is currently generating about 0.01 per unit of risk. If you would invest 3,365,200 in Kumba Iron Ore on September 14, 2024 and sell it today you would earn a total of 91,000 from holding Kumba Iron Ore or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumba Iron Ore vs. enX Group
Performance |
| Timeline |
| Kumba Iron Ore |
| enX Group |
Kumba Iron and EnX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and EnX
The main advantage of trading using opposite Kumba Iron and EnX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, EnX 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 EnX will offset losses from the drop in EnX's long position.| Kumba Iron vs. ArcelorMittal South Africa | Kumba Iron vs. Argent | Kumba Iron vs. Sasol Ltd Bee | Kumba Iron vs. Centaur Bci Balanced |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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