Correlation Between E Media and Thungela Resources

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

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

Diversification Opportunities for E Media and Thungela Resources

0.08

Correlation Coefficient

E Media  Thungela Resources

Significant diversification

The 3 months correlation between EMH and Thungela is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and E Media 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 E Media Holdings 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 E Media i.e., E Media and Thungela Resources go up and down completely randomly.

Pair Corralation between E Media and Thungela Resources

Assuming the 90 days trading horizon E Media Holdings is expected to generate 2.06 times more return on investment than Thungela Resources. However, E Media is 2.06 times more volatile than Thungela Resources Limited. It trades about 0.04 of its potential returns per unit of risk. Thungela Resources Limited is currently generating about 0.06 per unit of risk. If you would invest  35,500  in E Media Holdings on October 25, 2024 and sell it today you would earn a total of  500.00  from holding E Media Holdings or generate 1.41% return on investment over 90 days.

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

E Media Holdings  vs.  Thungela Resources Limited

E Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, E Media is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Thungela Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Thungela Resources is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with E Media and Thungela Resources

The main advantage of trading using opposite E Media and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Media 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 E Media Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.