Correlation Between Thungela Resources and Nedbank

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

Diversification Opportunities for Thungela Resources and Nedbank

-0.44

Correlation Coefficient

Thungela Resources  Nedbank

Very good diversification

The 3 months correlation between Thungela and Nedbank is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Thungela Resources i.e., Thungela Resources and Nedbank go up and down completely randomly.

Pair Corralation between Thungela Resources and Nedbank

Assuming the 90 days trading horizon Thungela Resources Limited is expected to generate 1.46 times more return on investment than Nedbank. However, Thungela Resources is 1.46 times more volatile than Nedbank Group. It trades about 0.07 of its potential returns per unit of risk. Nedbank Group is currently generating about 0.08 per unit of risk. If you would invest  1,116,669  in Thungela Resources Limited on September 27, 2024 and sell it today you would earn a total of  193,331  from holding Thungela Resources Limited or generate 17.31% return on investment over 90 days.

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

Thungela Resources Limited  vs.  Nedbank Group

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.

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Thungela Resources and Nedbank

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

The idea behind Thungela Resources Limited and Nedbank 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.