Correlation Between Thungela Resources and Brait SE

Can any of the company-specific risk be diversified away by investing in both Thungela Resources and Brait SE 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 Brait SE 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 Brait SE, you can compare the effects of market volatilities on Thungela Resources and Brait SE 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 Brait SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thungela Resources and Brait SE.

Diversification Opportunities for Thungela Resources and Brait SE

0.71

Correlation Coefficient

Thungela Resources  Brait SE

Poor diversification

The 3 months correlation between Thungela and Brait is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Brait SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brait SE 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 Brait SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brait SE has no effect on the direction of Thungela Resources i.e., Thungela Resources and Brait SE go up and down completely randomly.

Pair Corralation between Thungela Resources and Brait SE

Assuming the 90 days trading horizon Thungela Resources Limited is expected to under-perform the Brait SE. But the stock apears to be less risky and, when comparing its historical volatility, Thungela Resources Limited is 1.18 times less risky than Brait SE. The stock trades about -0.05 of its potential returns per unit of risk. The Brait SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19,600  in Brait SE on September 24, 2024 and sell it today you would earn a total of  400.00  from holding Brait SE or generate 2.04% return on investment over 90 days.

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

Thungela Resources Limited  vs.  Brait SE

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.

Brait SE

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brait SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thungela Resources and Brait SE

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

The idea behind Thungela Resources Limited and Brait SE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.