Correlation Between Grupo Simec and Kumba Iron

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

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

Diversification Opportunities for Grupo Simec and Kumba Iron

0.61

Correlation Coefficient

Grupo Simec  Kumba Iron

Poor diversification

The 3 months correlation between Grupo and Kumba is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB 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 Grupo Simec 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 Grupo Simec SAB 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 Grupo Simec i.e., Grupo Simec and Kumba Iron go up and down completely randomly.

Pair Corralation between Grupo Simec and Kumba Iron

Considering the 90-day investment horizon Grupo Simec SAB is expected to under-perform the Kumba Iron. In addition to that, Grupo Simec is 1.35 times more volatile than Kumba Iron Ore. It trades about -0.04 of its total potential returns per unit of risk. Kumba Iron Ore is currently generating about 0.18 per unit of volatility. If you would invest  620.00  in Kumba Iron Ore on September 15, 2024 and sell it today you would earn a total of  40.00  from holding Kumba Iron Ore or generate 6.45% return on investment over 90 days.

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

Grupo Simec SAB  vs.  Kumba Iron Ore

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 fairly strong basic indicators, Kumba Iron is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Simec and Kumba Iron

The main advantage of trading using opposite Grupo Simec and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.