Correlation Between Kumba Iron and Lesaka Technologies
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Lesaka Technologies 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 Lesaka Technologies 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 Lesaka Technologies, you can compare the effects of market volatilities on Kumba Iron and Lesaka Technologies 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 Lesaka Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Lesaka Technologies.
Diversification Opportunities for Kumba Iron and Lesaka Technologies
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Kumba and Lesaka is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Lesaka Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lesaka Technologies 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 Lesaka Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lesaka Technologies has no effect on the direction of Kumba Iron i.e., Kumba Iron and Lesaka Technologies go up and down completely randomly.
Pair Corralation between Kumba Iron and Lesaka Technologies
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 1.08 times more return on investment than Lesaka Technologies. However, Kumba Iron is 1.08 times more volatile than Lesaka Technologies. It trades about 0.3 of its potential returns per unit of risk. Lesaka Technologies is currently generating about 0.05 per unit of risk. If you would invest 3,320,600 in Kumba Iron Ore on November 3, 2024 and sell it today you would earn a total of 565,700 from holding Kumba Iron Ore or generate 17.04% 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. Lesaka Technologies
Performance |
| Timeline |
| Kumba Iron Ore |
| Lesaka Technologies |
Kumba Iron and Lesaka Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and Lesaka Technologies
The main advantage of trading using opposite Kumba Iron and Lesaka Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Lesaka Technologies 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 Lesaka Technologies will offset losses from the drop in Lesaka Technologies' long position.| Kumba Iron vs. Reinet Investments SCA | Kumba Iron vs. Trematon Capital Investments | Kumba Iron vs. RCL Foods | Kumba Iron vs. Nedbank Group |
| Lesaka Technologies vs. African Media Entertainment | Lesaka Technologies vs. Ascendis Health | Lesaka Technologies vs. Hosken Consolidated Investments | Lesaka Technologies vs. Astoria Investments |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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