Correlation Between RCL Foods and Thungela Resources

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

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

Diversification Opportunities for RCL Foods and Thungela Resources

0.11

Correlation Coefficient

RCL Foods  Thungela Resources

Average diversification

The 3 months correlation between RCL and Thungela is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and RCL Foods 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 RCL Foods 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 RCL Foods i.e., RCL Foods and Thungela Resources go up and down completely randomly.

Pair Corralation between RCL Foods and Thungela Resources

Assuming the 90 days trading horizon RCL Foods is expected to generate 1.23 times more return on investment than Thungela Resources. However, RCL Foods is 1.23 times more volatile than Thungela Resources Limited. It trades about 0.01 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  110,000  in RCL Foods on October 11, 2024 and sell it today you would lose (14,900) from holding RCL Foods or give up 13.55% of portfolio value over 90 days.

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

RCL Foods  vs.  Thungela Resources Limited

RCL Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RCL Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Thungela Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 7 (%) 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 RCL Foods and Thungela Resources

The main advantage of trading using opposite RCL Foods and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods 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 RCL Foods 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.