Correlation Between Kumba Iron and Blue Label

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

Diversification Opportunities for Kumba Iron and Blue Label

0.06

Correlation Coefficient

Kumba Iron  Blue Label

Significant diversification

The 3 months correlation between Kumba and Blue is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms 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 Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of Kumba Iron i.e., Kumba Iron and Blue Label go up and down completely randomly.

Pair Corralation between Kumba Iron and Blue Label

Assuming the 90 days trading horizon Kumba Iron Ore is expected to under-perform the Blue Label. In addition to that, Kumba Iron is 1.21 times more volatile than Blue Label Telecoms. It trades about 0.0 of its total potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.11 per unit of volatility. If you would invest  55,800  in Blue Label Telecoms on October 26, 2024 and sell it today you would earn a total of  5,900  from holding Blue Label Telecoms or generate 10.57% return on investment over 90 days.

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

Kumba Iron Ore  vs.  Blue Label Telecoms

Kumba Iron Ore

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Kumba Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Blue Label Telecoms

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Label may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kumba Iron and Blue Label

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

The idea behind Kumba Iron Ore and Blue Label Telecoms 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.

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.