Correlation Between China Coal and New HopeLtd
Can any of the company-specific risk be diversified away by investing in both China Coal 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 China Coal and New HopeLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Coal Energy and New Hope, you can compare the effects of market volatilities on China Coal 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 China Coal with a short position of New HopeLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Coal and New HopeLtd.
Diversification Opportunities for China Coal and New HopeLtd
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and New is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Coal Energy and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New HopeLtd and China Coal 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 China Coal Energy 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 China Coal i.e., China Coal and New HopeLtd go up and down completely randomly.
Pair Corralation between China Coal and New HopeLtd
Assuming the 90 days horizon China Coal Energy is expected to generate 1.03 times more return on investment than New HopeLtd. However, China Coal is 1.03 times more volatile than New Hope. It trades about 0.19 of its potential returns per unit of risk. New Hope is currently generating about 0.04 per unit of risk. If you would invest 77.00 in China Coal Energy on September 1, 2024 and sell it today you would earn a total of 35.00 from holding China Coal Energy or generate 45.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 14.17% |
| Values | Daily Returns |
China Coal Energy vs. New Hope
Performance |
| Timeline |
| China Coal Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| New HopeLtd |
China Coal and New HopeLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Coal and New HopeLtd
The main advantage of trading using opposite China Coal and New HopeLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Coal 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.| China Coal vs. Yancoal Australia | China Coal vs. China Coal Energy | China Coal vs. Bukit Asam Tbk | China Coal vs. China Shenhua Energy |
| New HopeLtd vs. Indo Tambangraya Megah | New HopeLtd vs. Thungela Resources Limited | New HopeLtd vs. Geo Energy Resources |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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