Correlation Between Thungela Resources and Capitec Bank

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

Diversification Opportunities for Thungela Resources and Capitec Bank

-0.24

Correlation Coefficient

Thungela Resources  Capitec Bank

Very good diversification

The 3 months correlation between Thungela and Capitec is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Capitec Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitec Bank Holdings 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 Capitec Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitec Bank Holdings has no effect on the direction of Thungela Resources i.e., Thungela Resources and Capitec Bank go up and down completely randomly.

Pair Corralation between Thungela Resources and Capitec Bank

Assuming the 90 days trading horizon Thungela Resources Limited is expected to under-perform the Capitec Bank. But the stock apears to be less risky and, when comparing its historical volatility, Thungela Resources Limited is 17.89 times less risky than Capitec Bank. The stock trades about -0.01 of its potential returns per unit of risk. The Capitec Bank Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,014,547  in Capitec Bank Holdings on September 26, 2024 and sell it today you would earn a total of  8,453  from holding Capitec Bank Holdings or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Thungela Resources Limited  vs.  Capitec Bank Holdings

Thungela Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 11 (%) 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.

Capitec Bank Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capitec Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capitec Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thungela Resources and Capitec Bank

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

The idea behind Thungela Resources Limited and Capitec Bank Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.