Correlation Between Indo Tambangraya and Thungela Resources

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

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

Diversification Opportunities for Indo Tambangraya and Thungela Resources

-0.12

Correlation Coefficient

Indo Tambangraya  Thungela Resources

Good diversification

The 3 months correlation between Indo and Thungela is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Indo Tambangraya 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 Indo Tambangraya Megah 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 Indo Tambangraya i.e., Indo Tambangraya and Thungela Resources go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Thungela Resources

Assuming the 90 days horizon Indo Tambangraya Megah is expected to generate 1.11 times more return on investment than Thungela Resources. However, Indo Tambangraya is 1.11 times more volatile than Thungela Resources Limited. It trades about -0.02 of its potential returns per unit of risk. Thungela Resources Limited is currently generating about -0.1 per unit of risk. If you would invest  301.00  in Indo Tambangraya Megah on November 28, 2024 and sell it today you would lose (21.00) from holding Indo Tambangraya Megah or give up 6.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.42%
Values	Daily Returns

Indo Tambangraya Megah  vs.  Thungela Resources Limited

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Indo Tambangraya is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thungela Resources

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Indo Tambangraya and Thungela Resources

The main advantage of trading using opposite Indo Tambangraya and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Tambangraya 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 Indo Tambangraya Megah 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.