Correlation Between China Shenhua and PT Bayan
Can any of the company-specific risk be diversified away by investing in both China Shenhua and PT Bayan 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 PT Bayan 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 PT Bayan Resources, you can compare the effects of market volatilities on China Shenhua and PT Bayan 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 PT Bayan. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and PT Bayan.
Diversification Opportunities for China Shenhua and PT Bayan
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and BNB is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and PT Bayan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bayan Resources 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 PT Bayan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bayan Resources has no effect on the direction of China Shenhua i.e., China Shenhua and PT Bayan go up and down completely randomly.
Pair Corralation between China Shenhua and PT Bayan
Assuming the 90 days horizon China Shenhua Energy is expected to generate 2.62 times more return on investment than PT Bayan. However, China Shenhua is 2.62 times more volatile than PT Bayan Resources. It trades about 0.09 of its potential returns per unit of risk. PT Bayan Resources is currently generating about 0.02 per unit of risk. If you would invest 136.00 in China Shenhua Energy on September 4, 2024 and sell it today you would earn a total of 246.00 from holding China Shenhua Energy or generate 180.88% 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. PT Bayan Resources
Performance |
| Timeline |
| China Shenhua Energy |
| PT Bayan Resources |
China Shenhua and PT Bayan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and PT Bayan
The main advantage of trading using opposite China Shenhua and PT Bayan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua position performs unexpectedly, PT Bayan 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 PT Bayan will offset losses from the drop in PT Bayan's long position.| China Shenhua vs. PT Bayan Resources | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. PT Adaro Energy |
| PT Bayan vs. Yanzhou Coal Mining | PT Bayan vs. Yanzhou Coal Mining | PT Bayan vs. PT Adaro Energy | PT Bayan 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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