Correlation Between RCL Foods and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both RCL Foods 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 RCL Foods and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and Kumba Iron Ore, you can compare the effects of market volatilities on RCL Foods 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 RCL Foods with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and Kumba Iron.
Diversification Opportunities for RCL Foods and Kumba Iron
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between RCL and Kumba is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods 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 RCL Foods 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 RCL Foods 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 RCL Foods i.e., RCL Foods and Kumba Iron go up and down completely randomly.
Pair Corralation between RCL Foods and Kumba Iron
Assuming the 90 days trading horizon RCL Foods is expected to generate 1.22 times more return on investment than Kumba Iron. However, RCL Foods is 1.22 times more volatile than Kumba Iron Ore. It trades about 0.01 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.01 per unit of risk. If you would invest 104,800 in RCL Foods on September 5, 2024 and sell it today you would lose (12,400) from holding RCL Foods or give up 11.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
RCL Foods vs. Kumba Iron Ore
Performance |
| Timeline |
| RCL Foods |
| Kumba Iron Ore |
RCL Foods and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and Kumba Iron
The main advantage of trading using opposite RCL Foods and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods 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.The idea behind RCL Foods and Kumba Iron Ore pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Kumba Iron vs. RCL Foods | Kumba Iron vs. Astoria Investments | Kumba Iron vs. Europa Metals | Kumba Iron vs. Standard Bank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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