Correlation Between Kumba Iron and Sabvest Capital

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

Diversification Opportunities for Kumba Iron and Sabvest Capital

-0.18

Correlation Coefficient

Kumba Iron  Sabvest Capital

Good diversification

The 3 months correlation between Kumba and Sabvest is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Sabvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabvest Capital 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 Sabvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabvest Capital has no effect on the direction of Kumba Iron i.e., Kumba Iron and Sabvest Capital go up and down completely randomly.

Pair Corralation between Kumba Iron and Sabvest Capital

Assuming the 90 days trading horizon Kumba Iron Ore is expected to under-perform the Sabvest Capital. But the stock apears to be less risky and, when comparing its historical volatility, Kumba Iron Ore is 1.06 times less risky than Sabvest Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Sabvest Capital is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  745,000  in Sabvest Capital on September 15, 2024 and sell it today you would earn a total of  125,000  from holding Sabvest Capital or generate 16.78% return on investment over 90 days.

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

Kumba Iron Ore  vs.  Sabvest Capital

Kumba Iron Ore

Risk-Adjusted Performance

0 of 100

Very 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.

Sabvest Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabvest Capital 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, Sabvest Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kumba Iron and Sabvest Capital

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

The idea behind Kumba Iron Ore and Sabvest Capital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.