Correlation Between Nampak and Thungela Resources

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

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

Diversification Opportunities for Nampak and Thungela Resources

0.18

Correlation Coefficient

Nampak  Thungela Resources

Average diversification

The 3 months correlation between Nampak and Thungela is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nampak and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Nampak 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 Nampak 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 Nampak i.e., Nampak and Thungela Resources go up and down completely randomly.

Pair Corralation between Nampak and Thungela Resources

Assuming the 90 days trading horizon Nampak is expected to under-perform the Thungela Resources. In addition to that, Nampak is 1.34 times more volatile than Thungela Resources Limited. It trades about -0.05 of its total potential returns per unit of risk. Thungela Resources Limited is currently generating about 0.08 per unit of volatility. If you would invest  1,205,800  in Thungela Resources Limited on October 13, 2024 and sell it today you would earn a total of  104,200  from holding Thungela Resources Limited or generate 8.64% return on investment over 90 days.

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

Nampak  vs.  Thungela Resources Limited

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Thungela Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Thungela Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nampak and Thungela Resources

The main advantage of trading using opposite Nampak and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nampak 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 Nampak 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.