Correlation Between South32 and Kap Industrial
Can any of the company-specific risk be diversified away by investing in both South32 and Kap Industrial 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 South32 and Kap Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 and Kap Industrial Holdings, you can compare the effects of market volatilities on South32 and Kap Industrial 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 South32 with a short position of Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Kap Industrial.
Diversification Opportunities for South32 and Kap Industrial
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between South32 and Kap is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding South32 and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and South32 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 South32 are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of South32 i.e., South32 and Kap Industrial go up and down completely randomly.
Pair Corralation between South32 and Kap Industrial
Assuming the 90 days trading horizon South32 is expected to under-perform the Kap Industrial. But the stock apears to be less risky and, when comparing its historical volatility, South32 is 1.3 times less risky than Kap Industrial. The stock trades about -0.17 of its potential returns per unit of risk. The Kap Industrial Holdings is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 33,700 in Kap Industrial Holdings on September 13, 2024 and sell it today you would lose (2,100) from holding Kap Industrial Holdings or give up 6.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
South32 vs. Kap Industrial Holdings
Performance |
| Timeline |
| South32 |
| Kap Industrial Holdings |
South32 and Kap Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Kap Industrial
The main advantage of trading using opposite South32 and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Kap Industrial 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 Kap Industrial will offset losses from the drop in Kap Industrial's long position.| South32 vs. Datatec | South32 vs. MC Mining | South32 vs. Frontier Transport Holdings | South32 vs. Safari Investments RSA |
| Kap Industrial vs. Trematon Capital Investments | Kap Industrial vs. E Media Holdings | Kap Industrial vs. Advtech | Kap Industrial vs. Master Drilling 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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