Correlation Between Kumba Iron and Friedman Industries
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Friedman Industries 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 Friedman Industries 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 Friedman Industries, you can compare the effects of market volatilities on Kumba Iron and Friedman Industries 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 Friedman Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Friedman Industries.
Diversification Opportunities for Kumba Iron and Friedman Industries
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kumba and Friedman is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Friedman Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Friedman Industries 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 Friedman Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Friedman Industries has no effect on the direction of Kumba Iron i.e., Kumba Iron and Friedman Industries go up and down completely randomly.
Pair Corralation between Kumba Iron and Friedman Industries
Assuming the 90 days horizon Kumba Iron is expected to generate 1.13 times less return on investment than Friedman Industries. In addition to that, Kumba Iron is 1.06 times more volatile than Friedman Industries. It trades about 0.18 of its total potential returns per unit of risk. Friedman Industries is currently generating about 0.21 per unit of volatility. If you would invest 1,497 in Friedman Industries on November 9, 2024 and sell it today you would earn a total of 201.00 from holding Friedman Industries or generate 13.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Kumba Iron Ore vs. Friedman Industries
Performance |
| Timeline |
| Kumba Iron Ore |
| Friedman Industries |
Kumba Iron and Friedman Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumba Iron and Friedman Industries
The main advantage of trading using opposite Kumba Iron and Friedman Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Friedman Industries 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 Friedman Industries will offset losses from the drop in Friedman Industries' 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 |
| Friedman Industries vs. ArcelorMittal SA | Friedman Industries vs. Aperam PK | Friedman Industries vs. Acerinox SA ADR | Friedman Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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