Correlation Between Kumba Iron and MTN
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and MTN 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 MTN 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 MTN Group, you can compare the effects of market volatilities on Kumba Iron and MTN 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 MTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and MTN.
Diversification Opportunities for Kumba Iron and MTN
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Kumba and MTN is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN 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 MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Kumba Iron i.e., Kumba Iron and MTN go up and down completely randomly.
Pair Corralation between Kumba Iron and MTN
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 1.21 times more return on investment than MTN. However, Kumba Iron is 1.21 times more volatile than MTN Group. It trades about -0.01 of its potential returns per unit of risk. MTN Group is currently generating about -0.04 per unit of risk. If you would invest 4,187,875 in Kumba Iron Ore on September 12, 2024 and sell it today you would lose (676,375) from holding Kumba Iron Ore or give up 16.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumba Iron Ore vs. MTN Group
Performance |
| Timeline |
| Kumba Iron Ore |
| MTN Group |
Kumba Iron and MTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and MTN
The main advantage of trading using opposite Kumba Iron and MTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, MTN 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 MTN will offset losses from the drop in MTN's long position.| Kumba Iron vs. Master Drilling Group | Kumba Iron vs. Datatec | Kumba Iron vs. Frontier Transport Holdings | Kumba Iron vs. RCL Foods |
| MTN vs. Frontier Transport Holdings | MTN vs. Safari Investments RSA | MTN vs. Bytes Technology | MTN vs. Deneb 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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