Correlation Between United States and Yancoal Australia
Can any of the company-specific risk be diversified away by investing in both United States and Yancoal Australia 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 United States and Yancoal Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Yancoal Australia, you can compare the effects of market volatilities on United States and Yancoal Australia 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 United States with a short position of Yancoal Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Yancoal Australia.
Diversification Opportunities for United States and Yancoal Australia
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Yancoal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and United States 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 United States Steel are associated (or correlated) with Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of United States i.e., United States and Yancoal Australia go up and down completely randomly.
Pair Corralation between United States and Yancoal Australia
Assuming the 90 days trading horizon United States is expected to generate 1.75 times less return on investment than Yancoal Australia. But when comparing it to its historical volatility, United States Steel is 1.28 times less risky than Yancoal Australia. It trades about 0.04 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 249.00 in Yancoal Australia on September 12, 2024 and sell it today you would earn a total of 123.00 from holding Yancoal Australia or generate 49.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.7% |
| Values | Daily Returns |
United States Steel vs. Yancoal Australia
Performance |
| Timeline |
| United States Steel |
| Yancoal Australia |
United States and Yancoal Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Yancoal Australia
The main advantage of trading using opposite United States and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Yancoal Australia 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 Yancoal Australia will offset losses from the drop in Yancoal Australia's long position.| United States vs. ArcelorMittal | United States vs. NIPPON STEEL SPADR | United States vs. Reliance Steel Aluminum | United States vs. Superior Plus Corp |
| Yancoal Australia vs. DATAGROUP SE | Yancoal Australia vs. Jacquet Metal Service | Yancoal Australia vs. Automatic Data Processing | Yancoal Australia vs. United States Steel |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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