Correlation Between Thungela Resources and Naspers

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

Diversification Opportunities for Thungela Resources and Naspers

0.38

Correlation Coefficient

Thungela Resources  Naspers

Weak diversification

The 3 months correlation between Thungela and Naspers is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited 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 Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Thungela Resources i.e., Thungela Resources and Naspers go up and down completely randomly.

Pair Corralation between Thungela Resources and Naspers

Assuming the 90 days trading horizon Thungela Resources Limited is expected to under-perform the Naspers. In addition to that, Thungela Resources is 1.16 times more volatile than Naspers Limited. It trades about -0.01 of its total potential returns per unit of risk. Naspers Limited is currently generating about 0.04 per unit of volatility. If you would invest  29,739,900  in Naspers Limited on September 23, 2024 and sell it today you would earn a total of  12,460,100  from holding Naspers Limited or generate 41.9% 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.  Naspers Limited

Thungela Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 15 (%) 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.

Naspers Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Naspers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thungela Resources and Naspers

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

The idea behind Thungela Resources Limited and Naspers Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.