Correlation Between Kumba Iron and Mr Price

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

Diversification Opportunities for Kumba Iron and Mr Price

-0.54

Correlation Coefficient

Kumba Iron  Mr Price

Excellent diversification

The 3 months correlation between Kumba and MRP is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group 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 Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Kumba Iron i.e., Kumba Iron and Mr Price go up and down completely randomly.

Pair Corralation between Kumba Iron and Mr Price

Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 1.43 times more return on investment than Mr Price. However, Kumba Iron is 1.43 times more volatile than Mr Price Group. It trades about 0.06 of its potential returns per unit of risk. Mr Price Group is currently generating about -0.19 per unit of risk. If you would invest  3,200,000  in Kumba Iron Ore on December 20, 2024 and sell it today you would earn a total of  247,400  from holding Kumba Iron Ore or generate 7.73% 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.  Mr Price Group

Kumba Iron Ore

Risk-Adjusted Performance

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 weak technical and fundamental indicators, Kumba Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mr Price Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mr Price Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kumba Iron and Mr Price

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

The idea behind Kumba Iron Ore and Mr Price Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.