Correlation Between Thungela Resources and Mr Price

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

Diversification Opportunities for Thungela Resources and Mr Price

0.33

Correlation Coefficient

Thungela Resources  Mr Price

Weak diversification

The 3 months correlation between Thungela and MRP is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group 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 Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Thungela Resources i.e., Thungela Resources and Mr Price go up and down completely randomly.

Pair Corralation between Thungela Resources and Mr Price

Assuming the 90 days trading horizon Thungela Resources Limited is expected to under-perform the Mr Price. In addition to that, Thungela Resources is 1.36 times more volatile than Mr Price Group. It trades about -0.01 of its total potential returns per unit of risk. Mr Price Group is currently generating about 0.08 per unit of volatility. If you would invest  1,508,774  in Mr Price Group on September 24, 2024 and sell it today you would earn a total of  1,468,626  from holding Mr Price Group or generate 97.34% return on investment over 90 days.

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

Thungela Resources Limited  vs.  Mr Price Group

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.

Mr Price Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mr Price exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thungela Resources and Mr Price

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

The idea behind Thungela Resources Limited and Mr Price Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.