Correlation Between China Coal and New Hope
Can any of the company-specific risk be diversified away by investing in both China Coal and New Hope 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 Hope 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 Hope 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 Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Coal and New Hope.
Diversification Opportunities for China Coal and New Hope
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and New is 0.71. 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 Hope 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 Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of China Coal i.e., China Coal and New Hope go up and down completely randomly.
Pair Corralation between China Coal and New Hope
Assuming the 90 days horizon China Coal is expected to generate 2.62 times less return on investment than New Hope. But when comparing it to its historical volatility, China Coal Energy is 1.97 times less risky than New Hope. It trades about 0.04 of its potential returns per unit of risk. New Hope is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 285.00 in New Hope on August 28, 2024 and sell it today you would earn a total of 28.00 from holding New Hope or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.51% |
| Values | Daily Returns |
China Coal Energy vs. New Hope
Performance |
| Timeline |
| China Coal Energy |
| New Hope |
China Coal and New Hope Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Coal and New Hope
The main advantage of trading using opposite China Coal and New Hope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Coal position performs unexpectedly, New Hope 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 Hope will offset losses from the drop in New Hope's long position.| China Coal vs. Alliance Resource Partners | China Coal vs. Astera Labs, Common | China Coal vs. Autodesk | China Coal vs. Applied Blockchain |
| New Hope vs. Alliance Resource Partners | New Hope vs. Astera Labs, Common | New Hope vs. Autodesk | New Hope vs. Applied Blockchain |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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