Correlation Between RMB Holdings and Kumba Iron

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

Diversification Opportunities for RMB Holdings and Kumba Iron

-0.45

Correlation Coefficient

RMB Holdings  Kumba Iron

Very good diversification

The 3 months correlation between RMB and Kumba is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding RMB 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 RMB 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 RMB 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 RMB Holdings i.e., RMB Holdings and Kumba Iron go up and down completely randomly.

Pair Corralation between RMB Holdings and Kumba Iron

Assuming the 90 days trading horizon RMB Holdings is expected to generate 0.75 times more return on investment than Kumba Iron. However, RMB Holdings is 1.34 times less risky than Kumba Iron. It trades about 0.16 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.1 per unit of risk. If you would invest  4,200  in RMB Holdings on September 24, 2024 and sell it today you would earn a total of  200.00  from holding RMB Holdings or generate 4.76% return on investment over 90 days.

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

RMB Holdings  vs.  Kumba Iron Ore

RMB Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, RMB Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 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 RMB Holdings and Kumba Iron

The main advantage of trading using opposite RMB Holdings and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMB 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 RMB 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.