Correlation Between Thungela Resources and China Coal

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

Diversification Opportunities for Thungela Resources and China Coal

0.53

Correlation Coefficient

Thungela Resources  China Coal

Very weak diversification

The 3 months correlation between Thungela and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy 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 China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of Thungela Resources i.e., Thungela Resources and China Coal go up and down completely randomly.

Pair Corralation between Thungela Resources and China Coal

Assuming the 90 days horizon Thungela Resources Limited is expected to generate 1.23 times more return on investment than China Coal. However, Thungela Resources is 1.23 times more volatile than China Coal Energy. It trades about -0.08 of its potential returns per unit of risk. China Coal Energy is currently generating about -0.12 per unit of risk. If you would invest  674.00  in Thungela Resources Limited on December 30, 2024 and sell it today you would lose (89.00) from holding Thungela Resources Limited or give up 13.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.26%
Values	Daily Returns

Thungela Resources Limited  vs.  China Coal Energy

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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Coal Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Coal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Thungela Resources and China Coal

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

The idea behind Thungela Resources Limited and China Coal Energy 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.