Correlation Between China Shenhua and Whitehaven Coal
Can any of the company-specific risk be diversified away by investing in both China Shenhua and Whitehaven Coal 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 Shenhua and Whitehaven Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Shenhua Energy and Whitehaven Coal Limited, you can compare the effects of market volatilities on China Shenhua and Whitehaven Coal 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 Shenhua with a short position of Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and Whitehaven Coal.
Diversification Opportunities for China Shenhua and Whitehaven Coal
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Whitehaven is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal and China Shenhua 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 Shenhua Energy are associated (or correlated) with Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of China Shenhua i.e., China Shenhua and Whitehaven Coal go up and down completely randomly.
Pair Corralation between China Shenhua and Whitehaven Coal
Assuming the 90 days horizon China Shenhua is expected to generate 3.94 times less return on investment than Whitehaven Coal. But when comparing it to its historical volatility, China Shenhua Energy is 1.39 times less risky than Whitehaven Coal. It trades about 0.06 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 365.00 in Whitehaven Coal Limited on November 9, 2024 and sell it today you would earn a total of 26.00 from holding Whitehaven Coal Limited or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Shenhua Energy vs. Whitehaven Coal Limited
Performance |
| Timeline |
| China Shenhua Energy |
| Whitehaven Coal |
China Shenhua and Whitehaven Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and Whitehaven Coal
The main advantage of trading using opposite China Shenhua and Whitehaven Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua position performs unexpectedly, Whitehaven Coal 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 Whitehaven Coal will offset losses from the drop in Whitehaven Coal's long position.| China Shenhua vs. Adaro Energy Tbk | China Shenhua vs. Bukit Asam Tbk | China Shenhua vs. Indo Tambangraya Megah | China Shenhua vs. Yanzhou Coal Mining |
| Whitehaven Coal vs. New Hope | Whitehaven Coal vs. Adaro Energy Tbk | Whitehaven Coal vs. Thungela Resources Limited | Whitehaven Coal vs. Yancoal Australia |
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 CEOs Directory module to screen CEOs from public companies around the world.
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