Correlation Between Kumba Iron and RCL Foods
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and RCL Foods 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 RCL Foods 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 RCL Foods, you can compare the effects of market volatilities on Kumba Iron and RCL Foods 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 RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and RCL Foods.
Diversification Opportunities for Kumba Iron and RCL Foods
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kumba and RCL is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods 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 RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Kumba Iron i.e., Kumba Iron and RCL Foods go up and down completely randomly.
Pair Corralation between Kumba Iron and RCL Foods
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 0.93 times more return on investment than RCL Foods. However, Kumba Iron Ore is 1.07 times less risky than RCL Foods. It trades about 0.23 of its potential returns per unit of risk. RCL Foods is currently generating about 0.13 per unit of risk. If you would invest 3,298,700 in Kumba Iron Ore on October 25, 2024 and sell it today you would earn a total of 246,300 from holding Kumba Iron Ore or generate 7.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumba Iron Ore vs. RCL Foods
Performance |
| Timeline |
| Kumba Iron Ore |
| RCL Foods |
Kumba Iron and RCL Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and RCL Foods
The main advantage of trading using opposite Kumba Iron and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, RCL Foods 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 RCL Foods will offset losses from the drop in RCL Foods' long position.| Kumba Iron vs. Kap Industrial Holdings | Kumba Iron vs. Mantengu Mining | Kumba Iron vs. Frontier Transport Holdings | Kumba Iron vs. We Buy Cars |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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