Correlation Between Thungela Resources and Sebata Holdings

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

Diversification Opportunities for Thungela Resources and Sebata Holdings

-0.07

Correlation Coefficient

Thungela Resources  Sebata Holdings

Good diversification

The 3 months correlation between Thungela and Sebata is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Sebata Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sebata 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 Sebata Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sebata Holdings has no effect on the direction of Thungela Resources i.e., Thungela Resources and Sebata Holdings go up and down completely randomly.

Pair Corralation between Thungela Resources and Sebata Holdings

Assuming the 90 days trading horizon Thungela Resources Limited is expected to generate 0.49 times more return on investment than Sebata Holdings. However, Thungela Resources Limited is 2.05 times less risky than Sebata Holdings. It trades about 0.17 of its potential returns per unit of risk. Sebata Holdings is currently generating about 0.05 per unit of risk. If you would invest  1,266,500  in Thungela Resources Limited on October 26, 2024 and sell it today you would earn a total of  61,100  from holding Thungela Resources Limited or generate 4.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Thungela Resources Limited  vs.  Sebata Holdings

Thungela Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 1 (%) 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.

Sebata Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sebata Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sebata Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Thungela Resources and Sebata Holdings

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

The idea behind Thungela Resources Limited and Sebata 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.