Correlation Between SPORTING and China Coal
Can any of the company-specific risk be diversified away by investing in both SPORTING 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 SPORTING and China Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPORTING and China Coal Energy, you can compare the effects of market volatilities on SPORTING 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 SPORTING with a short position of China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORTING and China Coal.
Diversification Opportunities for SPORTING and China Coal
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPORTING and China is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING 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 SPORTING 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 SPORTING 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 SPORTING i.e., SPORTING and China Coal go up and down completely randomly.
Pair Corralation between SPORTING and China Coal
Assuming the 90 days trading horizon SPORTING is expected to generate 2.57 times less return on investment than China Coal. But when comparing it to its historical volatility, SPORTING is 1.63 times less risky than China Coal. It trades about 0.04 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 51.00 in China Coal Energy on September 14, 2024 and sell it today you would earn a total of 67.00 from holding China Coal Energy or generate 131.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
SPORTING vs. China Coal Energy
Performance |
| Timeline |
| SPORTING |
| China Coal Energy |
SPORTING and China Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPORTING and China Coal
The main advantage of trading using opposite SPORTING and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING 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.| SPORTING vs. Taylor Morrison Home | SPORTING vs. Clearside Biomedical | SPORTING vs. Addus HomeCare | SPORTING vs. SAFETY MEDICAL PROD |
| China Coal vs. SPORTING | China Coal vs. Charter Communications | China Coal vs. Verizon Communications | China Coal vs. Iridium Communications |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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