Correlation Between Italtile and Thungela Resources

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

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

Diversification Opportunities for Italtile and Thungela Resources

0.78

Correlation Coefficient

Italtile  Thungela Resources

Poor diversification

The 3 months correlation between Italtile and Thungela is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Italtile and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Italtile 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 Italtile 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 Italtile i.e., Italtile and Thungela Resources go up and down completely randomly.

Pair Corralation between Italtile and Thungela Resources

Assuming the 90 days trading horizon Italtile is expected to under-perform the Thungela Resources. But the stock apears to be less risky and, when comparing its historical volatility, Italtile is 1.19 times less risky than Thungela Resources. The stock trades about -0.23 of its potential returns per unit of risk. The Thungela Resources Limited is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,310,000  in Thungela Resources Limited on December 24, 2024 and sell it today you would lose (198,400) from holding Thungela Resources Limited or give up 15.15% of portfolio value over 90 days.

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

Italtile  vs.  Thungela Resources Limited

Italtile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Italtile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Italtile and Thungela Resources

The main advantage of trading using opposite Italtile and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Italtile 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 Italtile 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.