Correlation Between China Coal and NiSource
Can any of the company-specific risk be diversified away by investing in both China Coal and NiSource 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 NiSource 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 NiSource, you can compare the effects of market volatilities on China Coal and NiSource 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 NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Coal and NiSource.
Diversification Opportunities for China Coal and NiSource
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and NiSource is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Coal Energy and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of China Coal i.e., China Coal and NiSource go up and down completely randomly.
Pair Corralation between China Coal and NiSource
Assuming the 90 days horizon China Coal Energy is expected to generate 4.81 times more return on investment than NiSource. However, China Coal is 4.81 times more volatile than NiSource. It trades about 0.04 of its potential returns per unit of risk. NiSource is currently generating about 0.07 per unit of risk. If you would invest 1,610 in China Coal Energy on September 3, 2024 and sell it today you would earn a total of 750.00 from holding China Coal Energy or generate 46.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Coal Energy vs. NiSource
Performance |
| Timeline |
| China Coal Energy |
| NiSource |
China Coal and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Coal and NiSource
The main advantage of trading using opposite China Coal and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Coal position performs unexpectedly, NiSource 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 NiSource will offset losses from the drop in NiSource's long position.| China Coal vs. NiSource | China Coal vs. Treasury Wine Estates | China Coal vs. Pure Cycle | China Coal vs. Empresa Distribuidora y |
| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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