Correlation Between Thungela Resources and Afine Investments

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

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

Diversification Opportunities for Thungela Resources and Afine Investments

0.04

Correlation Coefficient

Thungela Resources  Afine Investments

Significant diversification

The 3 months correlation between Thungela and Afine is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Afine Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afine Investments and Thungela Resources 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 Thungela Resources Limited are associated (or correlated) with Afine Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afine Investments has no effect on the direction of Thungela Resources i.e., Thungela Resources and Afine Investments go up and down completely randomly.

Pair Corralation between Thungela Resources and Afine Investments

Assuming the 90 days trading horizon Thungela Resources is expected to generate 600.42 times less return on investment than Afine Investments. But when comparing it to its historical volatility, Thungela Resources Limited is 84.04 times less risky than Afine Investments. It trades about 0.02 of its potential returns per unit of risk. Afine Investments is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  451.00  in Afine Investments on September 24, 2024 and sell it today you would earn a total of  39,649  from holding Afine Investments or generate 8791.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Thungela Resources Limited  vs.  Afine Investments

Thungela Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Thungela Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Afine Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afine Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Afine Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thungela Resources and Afine Investments

The main advantage of trading using opposite Thungela Resources and Afine Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thungela Resources position performs unexpectedly, Afine Investments 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 Afine Investments will offset losses from the drop in Afine Investments' long position.

The idea behind Thungela Resources Limited and Afine Investments 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 Transaction History module to view history of all your transactions and understand their impact on performance.