Correlation Between Thungela Resources and Transpaco

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

Diversification Opportunities for Thungela Resources and Transpaco

-0.11

Correlation Coefficient

Thungela Resources  Transpaco

Good diversification

The 3 months correlation between Thungela and Transpaco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Transpaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpaco 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 Transpaco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transpaco has no effect on the direction of Thungela Resources i.e., Thungela Resources and Transpaco go up and down completely randomly.

Pair Corralation between Thungela Resources and Transpaco

Assuming the 90 days trading horizon Thungela Resources is expected to generate 1.5 times less return on investment than Transpaco. But when comparing it to its historical volatility, Thungela Resources Limited is 1.54 times less risky than Transpaco. It trades about 0.07 of its potential returns per unit of risk. Transpaco is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  300,100  in Transpaco on October 13, 2024 and sell it today you would earn a total of  74,900  from holding Transpaco or generate 24.96% return on investment over 90 days.

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

Thungela Resources Limited  vs.  Transpaco

Thungela Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 6 (%) 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.

Transpaco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transpaco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Transpaco is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Thungela Resources and Transpaco

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

The idea behind Thungela Resources Limited and Transpaco 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.