Correlation Between Alliance Resource and New HopeLtd
Can any of the company-specific risk be diversified away by investing in both Alliance Resource and New HopeLtd 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 Alliance Resource and New HopeLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Resource Partners and New Hope, you can compare the effects of market volatilities on Alliance Resource and New HopeLtd 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 Alliance Resource with a short position of New HopeLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Resource and New HopeLtd.
Diversification Opportunities for Alliance Resource and New HopeLtd
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alliance and New is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Resource Partners and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New HopeLtd and Alliance Resource 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 Alliance Resource Partners are associated (or correlated) with New HopeLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New HopeLtd has no effect on the direction of Alliance Resource i.e., Alliance Resource and New HopeLtd go up and down completely randomly.
Pair Corralation between Alliance Resource and New HopeLtd
Given the investment horizon of 90 days Alliance Resource is expected to generate 4.08 times less return on investment than New HopeLtd. But when comparing it to its historical volatility, Alliance Resource Partners is 6.5 times less risky than New HopeLtd. It trades about 0.08 of its potential returns per unit of risk. New Hope is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 312.00 in New Hope on August 31, 2024 and sell it today you would earn a total of 0.00 from holding New Hope or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 89.96% |
| Values | Daily Returns |
Alliance Resource Partners vs. New Hope
Performance |
| Timeline |
| Alliance Resource |
| New HopeLtd |
Alliance Resource and New HopeLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Resource and New HopeLtd
The main advantage of trading using opposite Alliance Resource and New HopeLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Resource position performs unexpectedly, New HopeLtd 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 New HopeLtd will offset losses from the drop in New HopeLtd's long position.| Alliance Resource vs. Peabody Energy Corp | Alliance Resource vs. Natural Resource Partners | Alliance Resource vs. Hallador Energy | Alliance Resource vs. NACCO Industries |
| New HopeLtd vs. Indo Tambangraya Megah | New HopeLtd vs. Adaro Energy Tbk | New HopeLtd vs. Thungela Resources Limited | New HopeLtd vs. China Shenhua 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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