Correlation Between Kumba Iron and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both Kumba Iron and ABSA Bank 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 ABSA Bank 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 ABSA Bank Limited, you can compare the effects of market volatilities on Kumba Iron and ABSA Bank 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 ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and ABSA Bank.
Diversification Opportunities for Kumba Iron and ABSA Bank
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kumba and ABSA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited 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 ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of Kumba Iron i.e., Kumba Iron and ABSA Bank go up and down completely randomly.
Pair Corralation between Kumba Iron and ABSA Bank
Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 2.38 times more return on investment than ABSA Bank. However, Kumba Iron is 2.38 times more volatile than ABSA Bank Limited. It trades about 0.02 of its potential returns per unit of risk. ABSA Bank Limited is currently generating about -0.08 per unit of risk. If you would invest 3,220,200 in Kumba Iron Ore on December 29, 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. ABSA Bank Limited
Performance |
Timeline |
Kumba Iron Ore |
ABSA Bank Limited |
Kumba Iron and ABSA Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kumba Iron and ABSA Bank
The main advantage of trading using opposite Kumba Iron and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, ABSA Bank 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 ABSA Bank will offset losses from the drop in ABSA Bank's long position.Kumba Iron vs. Allied Electronics | Kumba Iron vs. Zeder Investments | Kumba Iron vs. Boxer Retail | Kumba Iron vs. Lesaka Technologies |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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