Correlation Between Trematon Capital and Kumba Iron

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

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

Diversification Opportunities for Trematon Capital and Kumba Iron

0.2

Correlation Coefficient

Trematon Capital  Kumba Iron

Modest diversification

The 3 months correlation between Trematon and Kumba is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Trematon Capital Investments 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 Trematon Capital 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 Trematon Capital Investments 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 Trematon Capital i.e., Trematon Capital and Kumba Iron go up and down completely randomly.

Pair Corralation between Trematon Capital and Kumba Iron

Assuming the 90 days trading horizon Trematon Capital Investments is expected to generate 1.92 times more return on investment than Kumba Iron. However, Trematon Capital is 1.92 times more volatile than Kumba Iron Ore. It trades about 0.03 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.14 per unit of risk. If you would invest  24,400  in Trematon Capital Investments on September 29, 2024 and sell it today you would earn a total of  400.00  from holding Trematon Capital Investments or generate 1.64% return on investment over 90 days.

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

Trematon Capital Investments  vs.  Kumba Iron Ore

Trematon Capital Inv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trematon Capital Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Trematon Capital 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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Trematon Capital and Kumba Iron

The main advantage of trading using opposite Trematon Capital and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trematon Capital 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 Trematon Capital Investments 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.