Correlation Between Kumba Iron and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and SLM Corp 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 SLM Corp 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 Sanlam, you can compare the effects of market volatilities on Kumba Iron and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and SLM Corp.
Diversification Opportunities for Kumba Iron and SLM Corp
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Kumba and SLM is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Kumba Iron i.e., Kumba Iron and SLM Corp go up and down completely randomly.
Pair Corralation between Kumba Iron and SLM Corp
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 2.1 times more return on investment than SLM Corp. However, Kumba Iron is 2.1 times more volatile than Sanlam. It trades about 0.02 of its potential returns per unit of risk. Sanlam is currently generating about 0.02 per unit of risk. If you would invest 3,455,000 in Kumba Iron Ore on September 5, 2024 and sell it today you would earn a total of 12,500 from holding Kumba Iron Ore or generate 0.36% 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. Sanlam
Performance |
| Timeline |
| Kumba Iron Ore |
| SLM Corp |
Kumba Iron and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and SLM Corp
The main advantage of trading using opposite Kumba Iron and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.| Kumba Iron vs. RCL Foods | Kumba Iron vs. Astoria Investments | Kumba Iron vs. Europa Metals | Kumba Iron vs. Standard Bank Group |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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