Correlation Between Kumba Iron and Centaur Bci

Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Centaur Bci 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 Kumba Iron and Centaur Bci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kumba Iron Ore and Centaur Bci Balanced, you can compare the effects of market volatilities on Kumba Iron and Centaur Bci 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 Kumba Iron with a short position of Centaur Bci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Centaur Bci.

Diversification Opportunities for Kumba Iron and Centaur Bci

-0.23

Correlation Coefficient

Kumba Iron  Centaur Bci

Very good diversification

The 3 months correlation between Kumba and Centaur is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Centaur Bci Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaur Bci Balanced and Kumba Iron 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 Kumba Iron Ore are associated (or correlated) with Centaur Bci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaur Bci Balanced has no effect on the direction of Kumba Iron i.e., Kumba Iron and Centaur Bci go up and down completely randomly.

Pair Corralation between Kumba Iron and Centaur Bci

Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 3.57 times more return on investment than Centaur Bci. However, Kumba Iron is 3.57 times more volatile than Centaur Bci Balanced. It trades about 0.02 of its potential returns per unit of risk. Centaur Bci Balanced is currently generating about -0.09 per unit of risk. If you would invest  3,220,200  in Kumba Iron Ore on December 30, 2024 and sell it today you would earn a total of  41,000  from holding Kumba Iron Ore or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kumba Iron Ore  vs.  Centaur Bci Balanced

Kumba Iron Ore

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kumba Iron Ore are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Kumba Iron is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Centaur Bci Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centaur Bci Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Centaur Bci is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kumba Iron and Centaur Bci

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

The idea behind Kumba Iron Ore and Centaur Bci Balanced 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.