Correlation Between Waste Management and Yanzhou Coal
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Yanzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Yanzhou Coal Mining, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Yanzhou Coal.
Diversification Opportunities for Waste Management and Yanzhou Coal
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Waste and Yanzhou is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Yanzhou Coal go up and down completely randomly.
Pair Corralation between Waste Management and Yanzhou Coal
Assuming the 90 days trading horizon Waste Management is expected to under-perform the Yanzhou Coal. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 2.16 times less risky than Yanzhou Coal. The stock trades about -0.16 of its potential returns per unit of risk. The Yanzhou Coal Mining is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,140 in Yanzhou Coal Mining on September 14, 2024 and sell it today you would lose (20.00) from holding Yanzhou Coal Mining or give up 1.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Waste Management vs. Yanzhou Coal Mining
Performance |
| Timeline |
| Waste Management |
| Yanzhou Coal Mining |
Waste Management and Yanzhou Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Yanzhou Coal
The main advantage of trading using opposite Waste Management and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Apple Inc | Waste Management vs. Apple Inc | Waste Management vs. Apple Inc | Waste Management vs. Apple Inc |
| Yanzhou Coal vs. China Shenhua Energy | Yanzhou Coal vs. PT Bayan Resources | Yanzhou Coal vs. Yanzhou Coal Mining | Yanzhou Coal vs. PT Adaro Energy |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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