Correlation Between Thunder Bridge and Investec

Can any of the company-specific risk be diversified away by investing in both Thunder Bridge and Investec 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 Thunder Bridge and Investec into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thunder Bridge Capital and Investec Ltd ADR, you can compare the effects of market volatilities on Thunder Bridge and Investec 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 Thunder Bridge with a short position of Investec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thunder Bridge and Investec.

Diversification Opportunities for Thunder Bridge and Investec

-0.36

Correlation Coefficient

Thunder Bridge  Investec

Very good diversification

The 3 months correlation between Thunder and Investec is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Thunder Bridge Capital and Investec Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec ADR and Thunder Bridge 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 Thunder Bridge Capital are associated (or correlated) with Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec ADR has no effect on the direction of Thunder Bridge i.e., Thunder Bridge and Investec go up and down completely randomly.

Pair Corralation between Thunder Bridge and Investec

Assuming the 90 days horizon Thunder Bridge Capital is expected to generate 0.74 times more return on investment than Investec. However, Thunder Bridge Capital is 1.35 times less risky than Investec. It trades about 0.13 of its potential returns per unit of risk. Investec Ltd ADR is currently generating about -0.04 per unit of risk. If you would invest  1,119  in Thunder Bridge Capital on September 22, 2024 and sell it today you would earn a total of  123.00  from holding Thunder Bridge Capital or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.87%
Values	Daily Returns

Thunder Bridge Capital  vs.  Investec Ltd ADR

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Thunder Bridge unveiled solid returns over the last few months and may actually be approaching a breakup point.

Investec ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Investec is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thunder Bridge and Investec

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

The idea behind Thunder Bridge Capital and Investec Ltd ADR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.