Correlation Between Thungela Resources and Geo Energy

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

Diversification Opportunities for Thungela Resources and Geo Energy

-0.5

Correlation Coefficient

Thungela Resources  Geo Energy

Very good diversification

The 3 months correlation between Thungela and Geo is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Geo Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Energy Resources 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 Geo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geo Energy Resources has no effect on the direction of Thungela Resources i.e., Thungela Resources and Geo Energy go up and down completely randomly.

Pair Corralation between Thungela Resources and Geo Energy

Assuming the 90 days horizon Thungela Resources Limited is expected to under-perform the Geo Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Thungela Resources Limited is 1.0 times less risky than Geo Energy. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Geo Energy Resources is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Geo Energy Resources on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Geo Energy Resources or generate 35.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

Thungela Resources Limited  vs.  Geo Energy Resources

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.

Geo Energy Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Energy Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Geo Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thungela Resources and Geo Energy

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

The idea behind Thungela Resources Limited and Geo Energy Resources 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.