Correlation Between Kumba Iron and E Media

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

Diversification Opportunities for Kumba Iron and E Media

-0.37

Correlation Coefficient

Kumba Iron  E Media

Very good diversification

The 3 months correlation between Kumba and EMH is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and E Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Media 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 E Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Media Holdings has no effect on the direction of Kumba Iron i.e., Kumba Iron and E Media go up and down completely randomly.

Pair Corralation between Kumba Iron and E Media

Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 0.94 times more return on investment than E Media. However, Kumba Iron Ore is 1.06 times less risky than E Media. It trades about 0.44 of its potential returns per unit of risk. E Media Holdings is currently generating about -0.18 per unit of risk. If you would invest  3,205,000  in Kumba Iron Ore on October 20, 2024 and sell it today you would earn a total of  447,200  from holding Kumba Iron Ore or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Kumba Iron Ore  vs.  E Media Holdings

Kumba Iron Ore

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kumba Iron Ore are ranked lower than 4 (%) 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 February 2025.

E Media Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E Media Holdings 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, E Media is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kumba Iron and E Media

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

The idea behind Kumba Iron Ore and E Media 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.