Correlation Between Bitcoin and Thungela Resources

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

By analyzing existing cross correlation between Bitcoin and Thungela Resources Limited, you can compare the effects of market volatilities on Bitcoin and Thungela Resources 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 Bitcoin with a short position of Thungela Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and Thungela Resources.

Diversification Opportunities for Bitcoin and Thungela Resources

0.1

Correlation Coefficient

Bitcoin  Thungela Resources

Average diversification

The 3 months correlation between Bitcoin and Thungela is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Bitcoin 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 Bitcoin are associated (or correlated) with Thungela Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thungela Resources has no effect on the direction of Bitcoin i.e., Bitcoin and Thungela Resources go up and down completely randomly.

Pair Corralation between Bitcoin and Thungela Resources

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.04 times more return on investment than Thungela Resources. However, Bitcoin is 1.04 times more volatile than Thungela Resources Limited. It trades about 0.22 of its potential returns per unit of risk. Thungela Resources Limited is currently generating about 0.01 per unit of risk. If you would invest  6,701,472  in Bitcoin on October 25, 2024 and sell it today you would earn a total of  3,658,428  from holding Bitcoin or generate 54.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

Bitcoin  vs.  Thungela Resources Limited

Bitcoin

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Thungela Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thungela Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thungela Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bitcoin and Thungela Resources

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

The idea behind Bitcoin and Thungela Resources Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.