Correlation Between Yancoal Australia and TerraCom
Can any of the company-specific risk be diversified away by investing in both Yancoal Australia and TerraCom 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 TerraCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yancoal Australia and TerraCom Limited, you can compare the effects of market volatilities on Yancoal Australia and TerraCom 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 TerraCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and TerraCom.
Diversification Opportunities for Yancoal Australia and TerraCom
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Yancoal and TerraCom is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and TerraCom Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TerraCom Limited 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 TerraCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TerraCom Limited has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and TerraCom go up and down completely randomly.
Pair Corralation between Yancoal Australia and TerraCom
Assuming the 90 days horizon Yancoal Australia is expected to generate 25.29 times less return on investment than TerraCom. But when comparing it to its historical volatility, Yancoal Australia is 1.64 times less risky than TerraCom. It trades about 0.06 of its potential returns per unit of risk. TerraCom Limited is currently generating about 0.87 of returns per unit of risk over similar time horizon. If you would invest 14.00 in TerraCom Limited on August 28, 2024 and sell it today you would earn a total of 2.00 from holding TerraCom Limited or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 18.18% |
| Values | Daily Returns |
Yancoal Australia vs. TerraCom Limited
Performance |
| Timeline |
| Yancoal Australia |
| TerraCom Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Yancoal Australia and TerraCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yancoal Australia and TerraCom
The main advantage of trading using opposite Yancoal Australia and TerraCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yancoal Australia position performs unexpectedly, TerraCom 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 TerraCom will offset losses from the drop in TerraCom's long position.| Yancoal Australia vs. New Hope | Yancoal Australia vs. Thungela Resources Limited | Yancoal Australia vs. Whitehaven Coal Limited | Yancoal Australia vs. China Coal Energy |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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