Correlation Between Kumba Iron and Astoria Investments

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

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

Diversification Opportunities for Kumba Iron and Astoria Investments

0.24

Correlation Coefficient

Kumba Iron  Astoria Investments

Modest diversification

The 3 months correlation between Kumba and Astoria is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kumba Iron Ore and Astoria Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astoria Investments and Kumba Iron 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 Kumba Iron Ore are associated (or correlated) with Astoria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astoria Investments has no effect on the direction of Kumba Iron i.e., Kumba Iron and Astoria Investments go up and down completely randomly.

Pair Corralation between Kumba Iron and Astoria Investments

Assuming the 90 days trading horizon Kumba Iron Ore is expected to generate 2.08 times more return on investment than Astoria Investments. However, Kumba Iron is 2.08 times more volatile than Astoria Investments. It trades about 0.01 of its potential returns per unit of risk. Astoria Investments is currently generating about -0.21 per unit of risk. If you would invest  3,320,000  in Kumba Iron Ore on September 1, 2024 and sell it today you would earn a total of  5,700  from holding Kumba Iron Ore or generate 0.17% return on investment over 90 days.

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

Kumba Iron Ore  vs.  Astoria Investments

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 rather sound technical and fundamental indicators, Kumba Iron is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Astoria Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astoria Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Astoria Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kumba Iron and Astoria Investments

The main advantage of trading using opposite Kumba Iron and Astoria Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumba Iron position performs unexpectedly, Astoria Investments 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 Astoria Investments will offset losses from the drop in Astoria Investments' long position.

The idea behind Kumba Iron Ore and Astoria Investments 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.