Correlation Between China Shenhua and Yanzhou Coal
Can any of the company-specific risk be diversified away by investing in both China Shenhua 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 China Shenhua and Yanzhou 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 Yanzhou Coal Mining, you can compare the effects of market volatilities on China Shenhua 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 China Shenhua with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and Yanzhou Coal.
Diversification Opportunities for China Shenhua and Yanzhou Coal
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Yanzhou is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy 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 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 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 China Shenhua i.e., China Shenhua and Yanzhou Coal go up and down completely randomly.
Pair Corralation between China Shenhua and Yanzhou Coal
Assuming the 90 days horizon China Shenhua Energy is expected to generate 1.44 times more return on investment than Yanzhou Coal. However, China Shenhua is 1.44 times more volatile than Yanzhou Coal Mining. It trades about 0.09 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about 0.04 per unit of risk. If you would invest 136.00 in China Shenhua Energy on September 12, 2024 and sell it today you would earn a total of 277.00 from holding China Shenhua Energy or generate 203.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Shenhua Energy vs. Yanzhou Coal Mining
Performance |
| Timeline |
| China Shenhua Energy |
| Yanzhou Coal Mining |
China Shenhua and Yanzhou Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Shenhua and Yanzhou Coal
The main advantage of trading using opposite China Shenhua and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Shenhua 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.| China Shenhua vs. HomeToGo SE | China Shenhua vs. American Homes 4 | China Shenhua vs. Autohome ADR | China Shenhua vs. CENTURIA OFFICE REIT |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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