Correlation Between Yancoal Australia and Ava Risk

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

By analyzing existing cross correlation between Yancoal Australia and Ava Risk Group, you can compare the effects of market volatilities on Yancoal Australia and Ava Risk 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 Ava Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and Ava Risk.

Diversification Opportunities for Yancoal Australia and Ava Risk

0.66

Correlation Coefficient

Yancoal Australia  Ava Risk

Poor diversification

The 3 months correlation between Yancoal and Ava is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Ava Risk Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ava Risk Group 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 Ava Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ava Risk Group has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and Ava Risk go up and down completely randomly.

Pair Corralation between Yancoal Australia and Ava Risk

Assuming the 90 days trading horizon Yancoal Australia is expected to under-perform the Ava Risk. But the stock apears to be less risky and, when comparing its historical volatility, Yancoal Australia is 2.57 times less risky than Ava Risk. The stock trades about -0.08 of its potential returns per unit of risk. The Ava Risk Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Ava Risk Group on September 24, 2024 and sell it today you would earn a total of  1.00  from holding Ava Risk Group or generate 7.69% return on investment over 90 days.

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

Yancoal Australia  vs.  Ava Risk Group

Yancoal Australia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Yancoal Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ava Risk Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ava Risk Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ava Risk unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yancoal Australia and Ava Risk

The main advantage of trading using opposite Yancoal Australia and Ava Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yancoal Australia position performs unexpectedly, Ava Risk 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 Ava Risk will offset losses from the drop in Ava Risk's long position.

The idea behind Yancoal Australia and Ava Risk Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.