Correlation Between Life Healthcare and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both Life Healthcare and Kumba Iron 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 Life Healthcare and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and Kumba Iron Ore, you can compare the effects of market volatilities on Life Healthcare and Kumba Iron 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 Life Healthcare with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Kumba Iron.
Diversification Opportunities for Life Healthcare and Kumba Iron
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Life and Kumba is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore and Life Healthcare 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 Life Healthcare are associated (or correlated) with Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of Life Healthcare i.e., Life Healthcare and Kumba Iron go up and down completely randomly.
Pair Corralation between Life Healthcare and Kumba Iron
Assuming the 90 days trading horizon Life Healthcare is expected to generate 0.63 times more return on investment than Kumba Iron. However, Life Healthcare is 1.59 times less risky than Kumba Iron. It trades about 0.04 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.09 per unit of risk. If you would invest 169,200 in Life Healthcare on August 27, 2024 and sell it today you would earn a total of 1,600 from holding Life Healthcare or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Healthcare vs. Kumba Iron Ore
Performance |
| Timeline |
| Life Healthcare |
| Kumba Iron Ore |
Life Healthcare and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Kumba Iron
The main advantage of trading using opposite Life Healthcare and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare position performs unexpectedly, Kumba Iron 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 Kumba Iron will offset losses from the drop in Kumba Iron's long position.| Life Healthcare vs. Astoria Investments | Life Healthcare vs. Safari Investments RSA | Life Healthcare vs. Zeder Investments | Life Healthcare vs. Trematon Capital Investments |
| Kumba Iron vs. CA Sales Holdings | Kumba Iron vs. Hosken Consolidated Investments | Kumba Iron vs. Zeder Investments | Kumba Iron vs. Afine 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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