Correlation Between CN MODERN and Yancoal Australia
Can any of the company-specific risk be diversified away by investing in both CN MODERN and Yancoal Australia 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 CN MODERN and Yancoal Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and Yancoal Australia, you can compare the effects of market volatilities on CN MODERN and Yancoal Australia 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 CN MODERN with a short position of Yancoal Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Yancoal Australia.
Diversification Opportunities for CN MODERN and Yancoal Australia
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 07M and Yancoal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of CN MODERN i.e., CN MODERN and Yancoal Australia go up and down completely randomly.
Pair Corralation between CN MODERN and Yancoal Australia
Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 0.58 times more return on investment than Yancoal Australia. However, CN MODERN DAIRY is 1.74 times less risky than Yancoal Australia. It trades about 0.17 of its potential returns per unit of risk. Yancoal Australia is currently generating about -0.03 per unit of risk. If you would invest 9.30 in CN MODERN DAIRY on September 5, 2024 and sell it today you would earn a total of 0.70 from holding CN MODERN DAIRY or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. Yancoal Australia
Performance |
| Timeline |
| CN MODERN DAIRY |
| Yancoal Australia |
CN MODERN and Yancoal Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and Yancoal Australia
The main advantage of trading using opposite CN MODERN and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, Yancoal Australia 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 Yancoal Australia will offset losses from the drop in Yancoal Australia's long position.The idea behind CN MODERN DAIRY and Yancoal Australia 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.| Yancoal Australia vs. BORR DRILLING NEW | Yancoal Australia vs. Columbia Sportswear | Yancoal Australia vs. CN MODERN DAIRY | Yancoal Australia vs. AWILCO DRILLING PLC |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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