Correlation Between Kumba Iron and Coronation Global

Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Coronation Global 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 Coronation Global 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 Coronation Global Equity, you can compare the effects of market volatilities on Kumba Iron and Coronation Global 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 Coronation Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Coronation Global.

Diversification Opportunities for Kumba Iron and Coronation Global

0.53

Correlation Coefficient

Kumba Iron  Coronation Global

Very weak diversification

The 3 months correlation between Kumba and Coronation is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Coronation Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Global Equity 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 Coronation Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Global Equity has no effect on the direction of Kumba Iron i.e., Kumba Iron and Coronation Global go up and down completely randomly.

Pair Corralation between Kumba Iron and Coronation Global

Assuming the 90 days trading horizon Kumba Iron is expected to generate 1.64 times less return on investment than Coronation Global. In addition to that, Kumba Iron is 2.14 times more volatile than Coronation Global Equity. It trades about 0.04 of its total potential returns per unit of risk. Coronation Global Equity is currently generating about 0.15 per unit of volatility. If you would invest  267.00  in Coronation Global Equity on December 4, 2024 and sell it today you would earn a total of  27.00  from holding Coronation Global Equity or generate 10.11% return on investment over 90 days.

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

Kumba Iron Ore  vs.  Coronation Global Equity

Kumba Iron Ore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kumba Iron Ore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Kumba Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Coronation Global Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Coronation Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kumba Iron and Coronation Global

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

The idea behind Kumba Iron Ore and Coronation Global Equity 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.