Correlation Between Stelco Holdings and Kumba Iron

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

Diversification Opportunities for Stelco Holdings and Kumba Iron

-0.68

Correlation Coefficient

Stelco Holdings  Kumba Iron

Excellent diversification

The 3 months correlation between Stelco and Kumba is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stelco 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 Stelco 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 Stelco 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 Stelco Holdings i.e., Stelco Holdings and Kumba Iron go up and down completely randomly.

Pair Corralation between Stelco Holdings and Kumba Iron

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

Stelco Holdings  vs.  Kumba Iron Ore

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.

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.

Pair Trading with Stelco Holdings and Kumba Iron

The main advantage of trading using opposite Stelco Holdings and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stelco 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 Stelco 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.