Correlation Between Whitehaven Coal and Yanzhou Coal
Can any of the company-specific risk be diversified away by investing in both Whitehaven Coal 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 Whitehaven Coal and Yanzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitehaven Coal Limited and Yanzhou Coal Mining, you can compare the effects of market volatilities on Whitehaven Coal 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 Whitehaven Coal with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitehaven Coal and Yanzhou Coal.
Diversification Opportunities for Whitehaven Coal and Yanzhou Coal
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Whitehaven and Yanzhou is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal Limited 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 Whitehaven Coal 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 Whitehaven Coal Limited 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 Whitehaven Coal i.e., Whitehaven Coal and Yanzhou Coal go up and down completely randomly.
Pair Corralation between Whitehaven Coal and Yanzhou Coal
Assuming the 90 days horizon Whitehaven Coal Limited is expected to generate 0.84 times more return on investment than Yanzhou Coal. However, Whitehaven Coal Limited is 1.19 times less risky than Yanzhou Coal. It trades about -0.05 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.23 per unit of risk. If you would invest 402.00 in Whitehaven Coal Limited on September 5, 2024 and sell it today you would lose (9.00) from holding Whitehaven Coal Limited or give up 2.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Whitehaven Coal Limited vs. Yanzhou Coal Mining
Performance |
| Timeline |
| Whitehaven Coal |
| Yanzhou Coal Mining |
Whitehaven Coal and Yanzhou Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whitehaven Coal and Yanzhou Coal
The main advantage of trading using opposite Whitehaven Coal and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitehaven Coal 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.| Whitehaven Coal vs. PT Bayan Resources | Whitehaven Coal vs. Yanzhou Coal Mining | Whitehaven Coal vs. Yanzhou Coal Mining | Whitehaven Coal vs. PT Adaro Energy |
| Yanzhou Coal vs. PT Bayan Resources | Yanzhou Coal vs. Yanzhou Coal Mining | Yanzhou Coal vs. PT Adaro Energy | Yanzhou Coal vs. PT Bumi Resources |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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