Correlation Between Pepkor Holdings and Kumba Iron

Can any of the company-specific risk be diversified away by investing in both Pepkor Holdings and Kumba Iron 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 Pepkor Holdings and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pepkor Holdings and Kumba Iron Ore, you can compare the effects of market volatilities on Pepkor Holdings and Kumba Iron 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 Pepkor Holdings with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepkor Holdings and Kumba Iron.

Diversification Opportunities for Pepkor Holdings and Kumba Iron

0.11

Correlation Coefficient

Pepkor Holdings  Kumba Iron

Average diversification

The 3 months correlation between Pepkor and Kumba is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor Holdings and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore and Pepkor Holdings 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 Pepkor Holdings are associated (or correlated) with Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of Pepkor Holdings i.e., Pepkor Holdings and Kumba Iron go up and down completely randomly.

Pair Corralation between Pepkor Holdings and Kumba Iron

Assuming the 90 days trading horizon Pepkor Holdings is expected to generate 49.95 times more return on investment than Kumba Iron. However, Pepkor Holdings is 49.95 times more volatile than Kumba Iron Ore. It trades about 0.11 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about 0.05 per unit of risk. If you would invest  287,889  in Pepkor Holdings on December 22, 2024 and sell it today you would lose (32,389) from holding Pepkor Holdings or give up 11.25% of portfolio value over 90 days.

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

Pepkor Holdings  vs.  Kumba Iron Ore

Pepkor Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Pepkor Holdings and Kumba Iron

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

The idea behind Pepkor Holdings and Kumba Iron Ore 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..