Correlation Between Aveng and Thungela Resources
Can any of the company-specific risk be diversified away by investing in both Aveng 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 Aveng and Thungela Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aveng and Thungela Resources Limited, you can compare the effects of market volatilities on Aveng 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 Aveng with a short position of Thungela Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aveng and Thungela Resources.
Diversification Opportunities for Aveng and Thungela Resources
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aveng and Thungela is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Aveng 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 Aveng 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 Aveng i.e., Aveng and Thungela Resources go up and down completely randomly.
Pair Corralation between Aveng and Thungela Resources
Assuming the 90 days trading horizon Aveng is expected to generate 0.92 times more return on investment than Thungela Resources. However, Aveng is 1.08 times less risky than Thungela Resources. It trades about 0.19 of its potential returns per unit of risk. Thungela Resources Limited is currently generating about -0.05 per unit of risk. If you would invest 115,800 in Aveng on October 21, 2024 and sell it today you would earn a total of 6,700 from holding Aveng or generate 5.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aveng vs. Thungela Resources Limited
Performance |
| Timeline |
| Aveng |
| Thungela Resources |
Aveng and Thungela Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aveng and Thungela Resources
The main advantage of trading using opposite Aveng and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aveng 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 Aveng 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. Frontier Transport Holdings | Thungela Resources vs. Harmony Gold Mining | Thungela Resources vs. Safari Investments RSA | Thungela Resources vs. Boxer Retail |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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