Correlation Between Kumba Iron and Kap Industrial
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Kap Industrial 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 Kap Industrial 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 Kap Industrial Holdings, you can compare the effects of market volatilities on Kumba Iron and Kap Industrial 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 Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Kap Industrial.
Diversification Opportunities for Kumba Iron and Kap Industrial
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Kumba and Kap is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings 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 Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of Kumba Iron i.e., Kumba Iron and Kap Industrial go up and down completely randomly.
Pair Corralation between Kumba Iron and Kap Industrial
Assuming the 90 days trading horizon Kumba Iron is expected to generate 1.72 times less return on investment than Kap Industrial. But when comparing it to its historical volatility, Kumba Iron Ore is 1.06 times less risky than Kap Industrial. It trades about 0.02 of its potential returns per unit of risk. Kap Industrial Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 33,200 in Kap Industrial Holdings on September 5, 2024 and sell it today you would earn a total of 300.00 from holding Kap Industrial Holdings or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumba Iron Ore vs. Kap Industrial Holdings
Performance |
| Timeline |
| Kumba Iron Ore |
| Kap Industrial Holdings |
Kumba Iron and Kap Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and Kap Industrial
The main advantage of trading using opposite Kumba Iron and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Kap Industrial 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 Kap Industrial will offset losses from the drop in Kap Industrial's long position.| Kumba Iron vs. RCL Foods | Kumba Iron vs. Astoria Investments | Kumba Iron vs. Europa Metals | Kumba Iron vs. Standard Bank Group |
| Kap Industrial vs. Deneb Investments | Kap Industrial vs. Hosken Consolidated Investments | Kap Industrial vs. Astoria Investments | Kap Industrial vs. Safari Investments RSA |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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