Correlation Between National Bank and Yanzhou Coal

Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Yanzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Bank Holdings and Yanzhou Coal Mining, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Yanzhou Coal.

Diversification Opportunities for National Bank and Yanzhou Coal

-0.16

Correlation Coefficient

National Bank  Yanzhou Coal

Good diversification

The 3 months correlation between National and Yanzhou is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings 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 National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Yanzhou Coal go up and down completely randomly.

Pair Corralation between National Bank and Yanzhou Coal

Assuming the 90 days horizon National Bank Holdings is expected to under-perform the Yanzhou Coal. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.82 times less risky than Yanzhou Coal. The stock trades about -0.14 of its potential returns per unit of risk. The Yanzhou Coal Mining is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,120  in Yanzhou Coal Mining on September 19, 2024 and sell it today you would lose (20.00) from holding Yanzhou Coal Mining or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

National Bank Holdings  vs.  Yanzhou Coal Mining

National Bank Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Yanzhou Coal Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yanzhou Coal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Yanzhou Coal

The main advantage of trading using opposite National Bank and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.

The idea behind National Bank Holdings and Yanzhou Coal Mining 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.