Correlation Between Thungela Resources and Italtile

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

Diversification Opportunities for Thungela Resources and Italtile

0.11

Correlation Coefficient

Thungela Resources  Italtile

Average diversification

The 3 months correlation between Thungela and Italtile is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Italtile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Italtile 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 Italtile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Italtile has no effect on the direction of Thungela Resources i.e., Thungela Resources and Italtile go up and down completely randomly.

Pair Corralation between Thungela Resources and Italtile

Assuming the 90 days trading horizon Thungela Resources Limited is expected to generate 0.94 times more return on investment than Italtile. However, Thungela Resources Limited is 1.06 times less risky than Italtile. It trades about -0.02 of its potential returns per unit of risk. Italtile is currently generating about -0.08 per unit of risk. If you would invest  1,361,900  in Thungela Resources Limited on October 25, 2024 and sell it today you would lose (27,700) from holding Thungela Resources Limited or give up 2.03% of portfolio value over 90 days.

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

Thungela Resources Limited  vs.  Italtile

Thungela Resources

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Thungela Resources is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Italtile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Italtile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Italtile is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Thungela Resources and Italtile

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

The idea behind Thungela Resources Limited and Italtile 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.