Correlation Between China Shenhua and New HopeLtd
Can any of the company-specific risk be diversified away by investing in both China Shenhua 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 Shenhua 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 Shenhua Energy and New Hope, you can compare the effects of market volatilities on China Shenhua 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 Shenhua with a short position of New HopeLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and New HopeLtd.
Diversification Opportunities for China Shenhua and New HopeLtd
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and New is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua 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 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 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 Shenhua i.e., China Shenhua and New HopeLtd go up and down completely randomly.
Pair Corralation between China Shenhua and New HopeLtd
Assuming the 90 days horizon China Shenhua is expected to generate 1.35 times less return on investment than New HopeLtd. But when comparing it to its historical volatility, China Shenhua Energy is 2.13 times less risky than New HopeLtd. It trades about 0.06 of its potential returns per unit of risk. New Hope is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 286.00 in New Hope on August 31, 2024 and sell it today you would earn a total of 26.00 from holding New Hope or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 87.4% |
| Values | Daily Returns |
China Shenhua Energy vs. New Hope
Performance |
| Timeline |
| China Shenhua Energy |
| New HopeLtd |
China Shenhua and New HopeLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and New HopeLtd
The main advantage of trading using opposite China Shenhua and New HopeLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua 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 Shenhua vs. Bukit Asam Tbk | China Shenhua vs. Indo Tambangraya Megah | China Shenhua vs. Thungela Resources Limited |
| New HopeLtd vs. Indo Tambangraya Megah | New HopeLtd vs. Adaro Energy Tbk | New HopeLtd vs. Thungela Resources Limited | New HopeLtd 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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