Correlation Between Thungela Resources and SLM Corp

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

Diversification Opportunities for Thungela Resources and SLM Corp

0.13

Correlation Coefficient

Thungela Resources  SLM Corp

Average diversification

The 3 months correlation between Thungela and SLM is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Thungela Resources i.e., Thungela Resources and SLM Corp go up and down completely randomly.

Pair Corralation between Thungela Resources and SLM Corp

Assuming the 90 days trading horizon Thungela Resources Limited is expected to under-perform the SLM Corp. In addition to that, Thungela Resources is 1.7 times more volatile than Sanlam. It trades about -0.01 of its total potential returns per unit of risk. Sanlam is currently generating about 0.09 per unit of volatility. If you would invest  473,468  in Sanlam on October 10, 2024 and sell it today you would earn a total of  418,332  from holding Sanlam or generate 88.35% return on investment over 90 days.

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

Thungela Resources Limited  vs.  Sanlam

Thungela Resources

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Thungela Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SLM Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sanlam are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SLM Corp 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 SLM Corp

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

The idea behind Thungela Resources Limited and Sanlam 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.