Correlation Between Kumba Iron and Acerinox
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Acerinox 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 Acerinox 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 Acerinox SA ADR, you can compare the effects of market volatilities on Kumba Iron and Acerinox 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 Acerinox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Acerinox.
Diversification Opportunities for Kumba Iron and Acerinox
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Kumba and Acerinox is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR 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 Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of Kumba Iron i.e., Kumba Iron and Acerinox go up and down completely randomly.
Pair Corralation between Kumba Iron and Acerinox
Assuming the 90 days horizon Kumba Iron Ore is expected to generate 6.96 times more return on investment than Acerinox. However, Kumba Iron is 6.96 times more volatile than Acerinox SA ADR. It trades about 0.18 of its potential returns per unit of risk. Acerinox SA ADR is currently generating about 0.44 per unit of risk. If you would invest 575.00 in Kumba Iron Ore on November 9, 2024 and sell it today you would earn a total of 63.00 from holding Kumba Iron Ore or generate 10.96% 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. Acerinox SA ADR
Performance |
| Timeline |
| Kumba Iron Ore |
| Acerinox SA ADR |
Kumba Iron and Acerinox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and Acerinox
The main advantage of trading using opposite Kumba Iron and Acerinox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Acerinox 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 Acerinox will offset losses from the drop in Acerinox's long position.| Kumba Iron vs. Labrador Iron Ore | Kumba Iron vs. Fortescue Metals Group | Kumba Iron vs. Fortescue Metals Group | Kumba Iron vs. Anhui Conch Cement |
| Acerinox vs. ArcelorMittal SA | Acerinox vs. Algoma Steel Group | Acerinox vs. Synalloy | Acerinox vs. Algoma Steel Group |
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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