Correlation Between China Shenhua and China Coal
Can any of the company-specific risk be diversified away by investing in both China Shenhua and China 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 China 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 China Coal Energy, you can compare the effects of market volatilities on China Shenhua and China 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 China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and China Coal.
Diversification Opportunities for China Shenhua and China Coal
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and China is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy 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 China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of China Shenhua i.e., China Shenhua and China Coal go up and down completely randomly.
Pair Corralation between China Shenhua and China Coal
Assuming the 90 days horizon China Shenhua is expected to generate 1.78 times less return on investment than China Coal. But when comparing it to its historical volatility, China Shenhua Energy is 1.15 times less risky than China Coal. It trades about 0.05 of its potential returns per unit of risk. China Coal Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 77.00 in China Coal Energy on September 3, 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 | 35.58% |
| Values | Daily Returns |
China Shenhua Energy vs. China Coal Energy
Performance |
| Timeline |
| China Shenhua Energy |
| China Coal Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Shenhua and China Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and China Coal
The main advantage of trading using opposite China Shenhua and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua position performs unexpectedly, China 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 China Coal will offset losses from the drop in China Coal's long position.| China Shenhua vs. Bukit Asam Tbk | China Shenhua vs. Indo Tambangraya Megah | China Shenhua vs. Thungela Resources Limited |
| China Coal vs. Yancoal Australia | China Coal vs. China Coal Energy | China Coal vs. Bukit Asam Tbk | China Coal 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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