Correlation Between Talga and Savannah Resources

Can any of the company-specific risk be diversified away by investing in both Talga and Savannah 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 Talga and Savannah Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Talga Group and Savannah Resources Plc, you can compare the effects of market volatilities on Talga and Savannah 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 Talga with a short position of Savannah Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talga and Savannah Resources.

Diversification Opportunities for Talga and Savannah Resources

-0.11

Correlation Coefficient

Talga  Savannah Resources

Good diversification

The 3 months correlation between Talga and Savannah is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Talga Group and Savannah Resources Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savannah Resources Plc and Talga 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 Talga Group are associated (or correlated) with Savannah Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savannah Resources Plc has no effect on the direction of Talga i.e., Talga and Savannah Resources go up and down completely randomly.

Pair Corralation between Talga and Savannah Resources

Assuming the 90 days horizon Talga Group is expected to under-perform the Savannah Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Talga Group is 1.24 times less risky than Savannah Resources. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Savannah Resources Plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.33  in Savannah Resources Plc on September 12, 2024 and sell it today you would lose (1.37) from holding Savannah Resources Plc or give up 21.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.72%
Values	Daily Returns

Talga Group  vs.  Savannah Resources Plc

Talga Group

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga reported solid returns over the last few months and may actually be approaching a breakup point.

Savannah Resources Plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Savannah Resources Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Savannah Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Talga and Savannah Resources

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

The idea behind Talga Group and Savannah Resources Plc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .