Correlation Between Salzgitter and Kumba Iron

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

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

Diversification Opportunities for Salzgitter and Kumba Iron

0.18

Correlation Coefficient

Salzgitter  Kumba Iron

Average diversification

The 3 months correlation between Salzgitter and Kumba is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Salzgitter AG ADR 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 Salzgitter 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 Salzgitter AG ADR 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 Salzgitter i.e., Salzgitter and Kumba Iron go up and down completely randomly.

Pair Corralation between Salzgitter and Kumba Iron

Assuming the 90 days horizon Salzgitter AG ADR is expected to under-perform the Kumba Iron. But the pink sheet apears to be less risky and, when comparing its historical volatility, Salzgitter AG ADR is 1.22 times less risky than Kumba Iron. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Kumba Iron Ore is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  623.00  in Kumba Iron Ore on September 28, 2024 and sell it today you would lose (46.00) from holding Kumba Iron Ore or give up 7.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Salzgitter AG ADR  vs.  Kumba Iron Ore

Salzgitter AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salzgitter AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Salzgitter is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Salzgitter and Kumba Iron

The main advantage of trading using opposite Salzgitter and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salzgitter 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 Salzgitter AG ADR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.