Correlation Between Kumba Iron and Glencore PLC

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

Diversification Opportunities for Kumba Iron and Glencore PLC

-0.47

Correlation Coefficient

Kumba Iron  Glencore PLC

Very good diversification

The 3 months correlation between Kumba and Glencore is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Glencore PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC 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 Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC has no effect on the direction of Kumba Iron i.e., Kumba Iron and Glencore PLC go up and down completely randomly.

Pair Corralation between Kumba Iron and Glencore PLC

Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 1.1 times more return on investment than Glencore PLC. However, Kumba Iron is 1.1 times more volatile than Glencore PLC. It trades about -0.01 of its potential returns per unit of risk. Glencore PLC is currently generating about -0.04 per unit of risk. If you would invest  3,750,400  in Kumba Iron Ore on December 4, 2024 and sell it today you would lose (50,400) from holding Kumba Iron Ore or give up 1.34% of portfolio value over 90 days.

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

Kumba Iron Ore  vs.  Glencore PLC

Kumba Iron Ore

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kumba Iron Ore are ranked lower than 5 (%) 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.

Glencore PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kumba Iron and Glencore PLC

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

The idea behind Kumba Iron Ore and Glencore PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.