Correlation Between Anhui Conch and Kumba Iron

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

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

Diversification Opportunities for Anhui Conch and Kumba Iron

0.48

Correlation Coefficient

Anhui Conch  Kumba Iron

Very weak diversification

The 3 months correlation between Anhui and Kumba is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement 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 Anhui Conch 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 Anhui Conch Cement 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 Anhui Conch i.e., Anhui Conch and Kumba Iron go up and down completely randomly.

Pair Corralation between Anhui Conch and Kumba Iron

Assuming the 90 days horizon Anhui Conch Cement is expected to generate 1.48 times more return on investment than Kumba Iron. However, Anhui Conch is 1.48 times more volatile than Kumba Iron Ore. It trades about 0.1 of its potential returns per unit of risk. Kumba Iron Ore is currently generating about 0.01 per unit of risk. If you would invest  1,110  in Anhui Conch Cement on September 16, 2024 and sell it today you would earn a total of  233.00  from holding Anhui Conch Cement or generate 20.99% return on investment over 90 days.

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

Anhui Conch Cement  vs.  Kumba Iron Ore

Anhui Conch Cement

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong basic indicators, Kumba Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anhui Conch and Kumba Iron

The main advantage of trading using opposite Anhui Conch and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Conch 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 Anhui Conch Cement 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.