Correlation Between IDP EDUCATION and China Shenhua
Can any of the company-specific risk be diversified away by investing in both IDP EDUCATION 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 IDP EDUCATION and China Shenhua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDP EDUCATION LTD and China Shenhua Energy, you can compare the effects of market volatilities on IDP EDUCATION 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 IDP EDUCATION with a short position of China Shenhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDP EDUCATION and China Shenhua.
Diversification Opportunities for IDP EDUCATION and China Shenhua
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IDP and China is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD 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 IDP EDUCATION 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 IDP EDUCATION LTD 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 IDP EDUCATION i.e., IDP EDUCATION and China Shenhua go up and down completely randomly.
Pair Corralation between IDP EDUCATION and China Shenhua
Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the China Shenhua. But the stock apears to be less risky and, when comparing its historical volatility, IDP EDUCATION LTD is 1.73 times less risky than China Shenhua. The stock trades about -0.04 of its potential returns per unit of risk. The China Shenhua Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 142.00 in China Shenhua Energy on September 4, 2024 and sell it today you would earn a total of 240.00 from holding China Shenhua Energy or generate 169.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
IDP EDUCATION LTD vs. China Shenhua Energy
Performance |
| Timeline |
| IDP EDUCATION LTD |
| China Shenhua Energy |
IDP EDUCATION and China Shenhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDP EDUCATION and China Shenhua
The main advantage of trading using opposite IDP EDUCATION and China Shenhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDP EDUCATION 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.The idea behind IDP EDUCATION LTD and China Shenhua Energy 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.| China Shenhua vs. PT Bayan Resources | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. PT Adaro Energy |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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