Correlation Between Enbridge and Thungela Resources
Can any of the company-specific risk be diversified away by investing in both Enbridge and Thungela Resources 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 Enbridge and Thungela Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Thungela Resources Limited, you can compare the effects of market volatilities on Enbridge and Thungela Resources 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 Enbridge with a short position of Thungela Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Thungela Resources.
Diversification Opportunities for Enbridge and Thungela Resources
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enbridge and Thungela is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Enbridge 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 Enbridge are associated (or correlated) with Thungela Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thungela Resources has no effect on the direction of Enbridge i.e., Enbridge and Thungela Resources go up and down completely randomly.
Pair Corralation between Enbridge and Thungela Resources
Assuming the 90 days trading horizon Enbridge is expected to generate 0.42 times more return on investment than Thungela Resources. However, Enbridge is 2.36 times less risky than Thungela Resources. It trades about 0.31 of its potential returns per unit of risk. Thungela Resources Limited is currently generating about 0.09 per unit of risk. If you would invest 5,611 in Enbridge on August 28, 2024 and sell it today you would earn a total of 367.00 from holding Enbridge or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 72.73% |
| Values | Daily Returns |
Enbridge vs. Thungela Resources Limited
Performance |
| Timeline |
| Enbridge |
| Thungela Resources |
Enbridge and Thungela Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Thungela Resources
The main advantage of trading using opposite Enbridge and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Thungela Resources 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 Thungela Resources will offset losses from the drop in Thungela Resources' long position.The idea behind Enbridge and Thungela Resources Limited 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.| Thungela Resources vs. Bytes Technology | Thungela Resources vs. FC Investment Trust | Thungela Resources vs. Allianz Technology Trust | Thungela Resources vs. Smithson Investment Trust |
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.
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