Correlation Between Dow Jones and Thungela Resources
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Thungela Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Thungela Resources Limited, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Thungela Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Thungela Resources.
Diversification Opportunities for Dow Jones and Thungela Resources
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Thungela is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Thungela Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thungela Resources and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Thungela Resources go up and down completely randomly.
Pair Corralation between Dow Jones and Thungela Resources
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.76 times less return on investment than Thungela Resources. But when comparing it to its historical volatility, Dow Jones Industrial is 2.53 times less risky than Thungela Resources. It trades about 0.17 of its potential returns per unit of risk. Thungela Resources Limited is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,093,500 in Thungela Resources Limited on August 28, 2024 and sell it today you would earn a total of 263,100 from holding Thungela Resources Limited or generate 24.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Thungela Resources Limited
Performance |
| Timeline |
Dow Jones and Thungela Resources Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Thungela Resources Limited
Pair trading matchups for Thungela Resources
Pair Trading with Dow Jones and Thungela Resources
The main advantage of trading using opposite Dow Jones and Thungela Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Thungela Resources vs. Centaur Bci Balanced | Thungela Resources vs. Growthpoint Properties | Thungela Resources vs. Bowler Metcalf | Thungela Resources vs. Shoprite Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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