Correlation Between Thungela Resources and China Shenhua
Can any of the company-specific risk be diversified away by investing in both Thungela Resources and China Shenhua 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 Shenhua 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 Shenhua Energy, you can compare the effects of market volatilities on Thungela Resources and China Shenhua 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 Shenhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thungela Resources and China Shenhua.
Diversification Opportunities for Thungela Resources and China Shenhua
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Thungela and China is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and China Shenhua Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shenhua 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 Shenhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shenhua Energy has no effect on the direction of Thungela Resources i.e., Thungela Resources and China Shenhua go up and down completely randomly.
Pair Corralation between Thungela Resources and China Shenhua
Assuming the 90 days horizon Thungela Resources Limited is expected to generate 1.44 times more return on investment than China Shenhua. However, Thungela Resources is 1.44 times more volatile than China Shenhua Energy. It trades about 0.02 of its potential returns per unit of risk. China Shenhua Energy is currently generating about -0.01 per unit of risk. If you would invest 714.00 in Thungela Resources Limited on September 2, 2024 and sell it today you would earn a total of 5.00 from holding Thungela Resources Limited or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.27% |
| Values | Daily Returns |
Thungela Resources Limited vs. China Shenhua Energy
Performance |
| Timeline |
| Thungela Resources |
| China Shenhua Energy |
Thungela Resources and China Shenhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thungela Resources and China Shenhua
The main advantage of trading using opposite Thungela Resources and China Shenhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thungela Resources position performs unexpectedly, China Shenhua 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 Shenhua will offset losses from the drop in China Shenhua's long position.| Thungela Resources vs. Adaro Energy Tbk | Thungela Resources vs. Geo Energy Resources | Thungela Resources vs. Bukit Asam Tbk | Thungela Resources vs. New Hope |
| China Shenhua vs. Bukit Asam Tbk | China Shenhua vs. Indo Tambangraya Megah | China Shenhua vs. Thungela Resources Limited |
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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