Correlation Between Benchmark Electronics and Yancoal Australia

Can any of the company-specific risk be diversified away by investing in both Benchmark Electronics 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 Benchmark Electronics and Yancoal Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Benchmark Electronics and Yancoal Australia, you can compare the effects of market volatilities on Benchmark Electronics 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 Benchmark Electronics with a short position of Yancoal Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Electronics and Yancoal Australia.

Diversification Opportunities for Benchmark Electronics and Yancoal Australia

0.3

Correlation Coefficient

Benchmark Electronics  Yancoal Australia

Weak diversification

The 3 months correlation between Benchmark and Yancoal is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and Yancoal Australia go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Yancoal Australia

Assuming the 90 days horizon Benchmark Electronics is expected to under-perform the Yancoal Australia. But the stock apears to be less risky and, when comparing its historical volatility, Benchmark Electronics is 2.02 times less risky than Yancoal Australia. The stock trades about -0.18 of its potential returns per unit of risk. The Yancoal Australia is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  404.00  in Yancoal Australia on September 27, 2024 and sell it today you would lose (19.00) from holding Yancoal Australia or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Benchmark Electronics  vs.  Yancoal Australia

Benchmark Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Yancoal Australia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Benchmark Electronics and Yancoal Australia

The main advantage of trading using opposite Benchmark Electronics and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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.

The idea behind Benchmark Electronics and Yancoal Australia pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.