Correlation Between Sebata Holdings and Thungela Resources

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

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

Diversification Opportunities for Sebata Holdings and Thungela Resources

-0.42

Correlation Coefficient

Sebata Holdings  Thungela Resources

Very good diversification

The 3 months correlation between Sebata and Thungela is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sebata 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 Sebata Holdings 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 Sebata 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 Sebata Holdings i.e., Sebata Holdings and Thungela Resources go up and down completely randomly.

Pair Corralation between Sebata Holdings and Thungela Resources

Assuming the 90 days trading horizon Sebata Holdings is expected to generate 9.38 times less return on investment than Thungela Resources. In addition to that, Sebata Holdings is 1.48 times more volatile than Thungela Resources Limited. It trades about 0.01 of its total potential returns per unit of risk. Thungela Resources Limited is currently generating about 0.2 per unit of volatility. If you would invest  1,228,700  in Thungela Resources Limited on October 10, 2024 and sell it today you would earn a total of  95,700  from holding Thungela Resources Limited or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Sebata Holdings  vs.  Thungela Resources Limited

Sebata Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sebata Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sebata Holdings 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

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited 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, Thungela Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sebata Holdings and Thungela Resources

The main advantage of trading using opposite Sebata Holdings and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sebata Holdings 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 Sebata 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.