Correlation Between Yancoal Australia and CHINA SHENHUA
Can any of the company-specific risk be diversified away by investing in both Yancoal Australia and CHINA SHENHUA 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 Yancoal Australia and CHINA SHENHUA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yancoal Australia and CHINA SHENHUA ENA, you can compare the effects of market volatilities on Yancoal Australia and CHINA SHENHUA 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 Yancoal Australia with a short position of CHINA SHENHUA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and CHINA SHENHUA.
Diversification Opportunities for Yancoal Australia and CHINA SHENHUA
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Yancoal and CHINA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and CHINA SHENHUA ENA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SHENHUA ENA and Yancoal Australia 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 Yancoal Australia are associated (or correlated) with CHINA SHENHUA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SHENHUA ENA has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and CHINA SHENHUA go up and down completely randomly.
Pair Corralation between Yancoal Australia and CHINA SHENHUA
Assuming the 90 days trading horizon Yancoal Australia is expected to under-perform the CHINA SHENHUA. In addition to that, Yancoal Australia is 1.36 times more volatile than CHINA SHENHUA ENA. It trades about -0.05 of its total potential returns per unit of risk. CHINA SHENHUA ENA is currently generating about 0.19 per unit of volatility. If you would invest 1,530 in CHINA SHENHUA ENA on September 12, 2024 and sell it today you would earn a total of 130.00 from holding CHINA SHENHUA ENA or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yancoal Australia vs. CHINA SHENHUA ENA
Performance |
| Timeline |
| Yancoal Australia |
| CHINA SHENHUA ENA |
Yancoal Australia and CHINA SHENHUA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yancoal Australia and CHINA SHENHUA
The main advantage of trading using opposite Yancoal Australia and CHINA SHENHUA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yancoal Australia position performs unexpectedly, CHINA SHENHUA 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 SHENHUA will offset losses from the drop in CHINA SHENHUA's long position.| Yancoal Australia vs. CHINA SHENHUA ENA | Yancoal Australia vs. China Coal Energy | Yancoal Australia vs. Banpu PCL | Yancoal Australia vs. CONSOL Energy |
| CHINA SHENHUA vs. China Coal Energy | CHINA SHENHUA vs. Yancoal Australia | CHINA SHENHUA vs. Banpu PCL | CHINA SHENHUA vs. CONSOL 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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