Correlation Between Whitehaven Coal and Yanzhou Coal

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Can any of the company-specific risk be diversified away by investing in both Whitehaven Coal 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 Whitehaven Coal and Yanzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitehaven Coal Limited and Yanzhou Coal Mining, you can compare the effects of market volatilities on Whitehaven Coal 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 Whitehaven Coal with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitehaven Coal and Yanzhou Coal.

Diversification Opportunities for Whitehaven Coal and Yanzhou Coal

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Whitehaven and Yanzhou is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal Limited 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 Whitehaven Coal 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 Whitehaven Coal Limited 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 Whitehaven Coal i.e., Whitehaven Coal and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Whitehaven Coal and Yanzhou Coal

Assuming the 90 days horizon Whitehaven Coal Limited is expected to under-perform the Yanzhou Coal. In addition to that, Whitehaven Coal is 1.01 times more volatile than Yanzhou Coal Mining. It trades about -0.33 of its total potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.13 per unit of volatility. If you would invest  115.00  in Yanzhou Coal Mining on September 22, 2024 and sell it today you would lose (6.00) from holding Yanzhou Coal Mining or give up 5.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Whitehaven Coal Limited  vs.  Yanzhou Coal Mining

 Performance 
       Timeline  
Whitehaven Coal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Whitehaven Coal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Whitehaven Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Yanzhou Coal Mining 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Yanzhou Coal reported solid returns over the last few months and may actually be approaching a breakup point.

Whitehaven Coal and Yanzhou Coal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Whitehaven Coal and Yanzhou Coal

The main advantage of trading using opposite Whitehaven Coal and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitehaven Coal 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 Whitehaven Coal Limited 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.
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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