Correlation Between Thungela Resources and Woolworths Holdings

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

Diversification Opportunities for Thungela Resources and Woolworths Holdings

0.71

Correlation Coefficient

Thungela Resources  Woolworths Holdings

Poor diversification

The 3 months correlation between Thungela and Woolworths is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Woolworths Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Holdings has no effect on the direction of Thungela Resources i.e., Thungela Resources and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Thungela Resources and Woolworths Holdings

Assuming the 90 days trading horizon Thungela Resources Limited is expected to under-perform the Woolworths Holdings. In addition to that, Thungela Resources is 1.59 times more volatile than Woolworths Holdings. It trades about -0.12 of its total potential returns per unit of risk. Woolworths Holdings is currently generating about -0.16 per unit of volatility. If you would invest  604,401  in Woolworths Holdings on December 30, 2024 and sell it today you would lose (78,601) from holding Woolworths Holdings or give up 13.0% of portfolio value over 90 days.

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

Thungela Resources Limited  vs.  Woolworths Holdings

Thungela Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thungela Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Woolworths Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Thungela Resources and Woolworths Holdings

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

The idea behind Thungela Resources Limited and Woolworths 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.