Correlation Between Schroder European and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both Schroder European 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 Schroder European and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schroder European Real and Kumba Iron Ore, you can compare the effects of market volatilities on Schroder European 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 Schroder European with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schroder European and Kumba Iron.
Diversification Opportunities for Schroder European and Kumba Iron
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Schroder and Kumba is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Schroder European Real 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 Schroder European 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 Schroder European Real 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 Schroder European i.e., Schroder European and Kumba Iron go up and down completely randomly.
Pair Corralation between Schroder European and Kumba Iron
Assuming the 90 days trading horizon Schroder European Real is expected to generate 0.6 times more return on investment than Kumba Iron. However, Schroder European Real is 1.68 times less risky than Kumba Iron. It trades about -0.08 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.1 per unit of risk. If you would invest 199,400 in Schroder European Real on September 3, 2024 and sell it today you would lose (34,400) from holding Schroder European Real or give up 17.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schroder European Real vs. Kumba Iron Ore
Performance |
| Timeline |
| Schroder European Real |
| Kumba Iron Ore |
Schroder European and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schroder European and Kumba Iron
The main advantage of trading using opposite Schroder European and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schroder European 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.| Schroder European vs. Sasol Ltd Bee | Schroder European vs. Centaur Bci Balanced | Schroder European vs. Sabvest Capital | Schroder European vs. Growthpoint Properties |
| Kumba Iron vs. Trematon Capital Investments | Kumba Iron vs. Hosken Consolidated Investments | Kumba Iron vs. Reinet Investments SCA | Kumba Iron vs. Brimstone Investment |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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