Correlation Between Kap Industrial and Sibanye Stillwater

Can any of the company-specific risk be diversified away by investing in both Kap Industrial and Sibanye Stillwater 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 Kap Industrial and Sibanye Stillwater into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kap Industrial Holdings and Sibanye Stillwater, you can compare the effects of market volatilities on Kap Industrial and Sibanye Stillwater 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 Kap Industrial with a short position of Sibanye Stillwater. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and Sibanye Stillwater.

Diversification Opportunities for Kap Industrial and Sibanye Stillwater

-0.26

Correlation Coefficient

Kap Industrial  Sibanye Stillwater

Very good diversification

The 3 months correlation between Kap and Sibanye is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Sibanye Stillwater in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sibanye Stillwater and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with Sibanye Stillwater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sibanye Stillwater has no effect on the direction of Kap Industrial i.e., Kap Industrial and Sibanye Stillwater go up and down completely randomly.

Pair Corralation between Kap Industrial and Sibanye Stillwater

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Sibanye Stillwater. But the stock apears to be less risky and, when comparing its historical volatility, Kap Industrial Holdings is 1.09 times less risky than Sibanye Stillwater. The stock trades about -0.06 of its potential returns per unit of risk. The Sibanye Stillwater is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  163,200  in Sibanye Stillwater on December 21, 2024 and sell it today you would earn a total of  29,800  from holding Sibanye Stillwater or generate 18.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Kap Industrial Holdings  vs.  Sibanye Stillwater

Kap Industrial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sibanye Stillwater

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sibanye Stillwater are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sibanye Stillwater exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and Sibanye Stillwater

The main advantage of trading using opposite Kap Industrial and Sibanye Stillwater positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial position performs unexpectedly, Sibanye Stillwater 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 Sibanye Stillwater will offset losses from the drop in Sibanye Stillwater's long position.

The idea behind Kap Industrial Holdings and Sibanye Stillwater 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.

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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..