Correlation Between SEVEN GROUP and Yancoal Australia

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

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

Diversification Opportunities for SEVEN GROUP and Yancoal Australia

-0.05

Correlation Coefficient

SEVEN GROUP  Yancoal Australia

Good diversification

The 3 months correlation between SEVEN and Yancoal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SEVEN GROUP HOLDINGS and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and SEVEN GROUP 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 SEVEN GROUP HOLDINGS 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 SEVEN GROUP i.e., SEVEN GROUP and Yancoal Australia go up and down completely randomly.

Pair Corralation between SEVEN GROUP and Yancoal Australia

Assuming the 90 days trading horizon SEVEN GROUP is expected to generate 1.77 times less return on investment than Yancoal Australia. But when comparing it to its historical volatility, SEVEN GROUP HOLDINGS is 1.4 times less risky than Yancoal Australia. It trades about 0.08 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  563.00  in Yancoal Australia on September 23, 2024 and sell it today you would earn a total of  63.00  from holding Yancoal Australia or generate 11.19% return on investment over 90 days.

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

SEVEN GROUP HOLDINGS  vs.  Yancoal Australia

SEVEN GROUP HOLDINGS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SEVEN GROUP HOLDINGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, SEVEN GROUP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Yancoal Australia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Yancoal Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SEVEN GROUP and Yancoal Australia

The main advantage of trading using opposite SEVEN GROUP and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEVEN GROUP 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 SEVEN GROUP HOLDINGS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.