Correlation Between Kumba Iron and CA Sales

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

Diversification Opportunities for Kumba Iron and CA Sales

-0.43

Correlation Coefficient

Kumba Iron  CA Sales

Very good diversification

The 3 months correlation between Kumba and CAA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and CA Sales Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CA Sales Holdings 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 CA Sales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CA Sales Holdings has no effect on the direction of Kumba Iron i.e., Kumba Iron and CA Sales go up and down completely randomly.

Pair Corralation between Kumba Iron and CA Sales

Assuming the 90 days trading horizon Kumba Iron is expected to generate 4.06 times less return on investment than CA Sales. In addition to that, Kumba Iron is 1.18 times more volatile than CA Sales Holdings. It trades about 0.02 of its total potential returns per unit of risk. CA Sales Holdings is currently generating about 0.09 per unit of volatility. If you would invest  145,000  in CA Sales Holdings on September 12, 2024 and sell it today you would earn a total of  15,700  from holding CA Sales Holdings or generate 10.83% return on investment over 90 days.

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

Kumba Iron Ore  vs.  CA Sales Holdings

Kumba Iron Ore

Risk-Adjusted Performance

1 of 100

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.

CA Sales Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kumba Iron and CA Sales

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

The idea behind Kumba Iron Ore and CA Sales Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.