Correlation Between Dow Jones and Yanzhou Coal
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Yanzhou 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 Dow Jones and Yanzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Yanzhou Coal Mining, you can compare the effects of market volatilities on Dow Jones and Yanzhou 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 Dow Jones with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Yanzhou Coal.
Diversification Opportunities for Dow Jones and Yanzhou Coal
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Yanzhou is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of Dow Jones i.e., Dow Jones and Yanzhou Coal go up and down completely randomly.
Pair Corralation between Dow Jones and Yanzhou Coal
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.55 times more return on investment than Yanzhou Coal. However, Dow Jones Industrial is 1.83 times less risky than Yanzhou Coal. It trades about 0.37 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.22 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 321,944 from holding Dow Jones Industrial or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. Yanzhou Coal Mining
Performance |
| Timeline |
Dow Jones and Yanzhou Coal Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Yanzhou Coal Mining
Pair trading matchups for Yanzhou Coal
Pair Trading with Dow Jones and Yanzhou Coal
The main advantage of trading using opposite Dow Jones and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Yanzhou 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 Yanzhou Coal will offset losses from the drop in Yanzhou Coal's long position.| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
| Yanzhou Coal vs. PT Bayan Resources | Yanzhou Coal vs. Yanzhou Coal Mining | Yanzhou Coal vs. PT Adaro Energy | Yanzhou Coal vs. PT Bumi Resources |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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