Correlation Between Thungela Resources and Alliance Resource

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

Diversification Opportunities for Thungela Resources and Alliance Resource

0.51

Correlation Coefficient

Thungela Resources  Alliance Resource

Very weak diversification

The 3 months correlation between Thungela and Alliance is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Thungela Resources Limited and Alliance Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Resource 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 Alliance Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Resource has no effect on the direction of Thungela Resources i.e., Thungela Resources and Alliance Resource go up and down completely randomly.

Pair Corralation between Thungela Resources and Alliance Resource

Assuming the 90 days horizon Thungela Resources Limited is expected to generate 2.78 times more return on investment than Alliance Resource. However, Thungela Resources is 2.78 times more volatile than Alliance Resource Partners. It trades about 0.07 of its potential returns per unit of risk. Alliance Resource Partners is currently generating about 0.1 per unit of risk. If you would invest  659.00  in Thungela Resources Limited on July 29, 2024 and sell it today you would earn a total of  76.00  from holding Thungela Resources Limited or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.23%
Values	Daily Returns

Thungela Resources Limited  vs.  Alliance Resource Partners

Thungela Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thungela Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Thungela Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Alliance Resource

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Alliance Resource may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Thungela Resources and Alliance Resource

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

The idea behind Thungela Resources Limited and Alliance Resource Partners 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.