Correlation Between Kumba Iron and Stelco Holdings

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

Diversification Opportunities for Kumba Iron and Stelco Holdings

-0.68

Correlation Coefficient

Kumba Iron  Stelco Holdings

Excellent diversification

The 3 months correlation between Kumba and Stelco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Stelco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelco 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 Stelco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelco Holdings has no effect on the direction of Kumba Iron i.e., Kumba Iron and Stelco Holdings go up and down completely randomly.

Pair Corralation between Kumba Iron and Stelco Holdings

If you would invest  4,941  in Stelco Holdings on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Stelco Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Kumba Iron Ore  vs.  Stelco Holdings

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Stelco Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Stelco Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Stelco Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kumba Iron and Stelco Holdings

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

The idea behind Kumba Iron Ore and Stelco 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.