Correlation Between Yancoal Australia and Hub24

Can any of the company-specific risk be diversified away by investing in both Yancoal Australia and Hub24 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 Hub24 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yancoal Australia and Hub24, you can compare the effects of market volatilities on Yancoal Australia and Hub24 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 Hub24. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and Hub24.

Diversification Opportunities for Yancoal Australia and Hub24

0.43

Correlation Coefficient

Yancoal Australia  Hub24

Very weak diversification

The 3 months correlation between Yancoal and Hub24 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Hub24 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub24 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 Hub24. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub24 has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and Hub24 go up and down completely randomly.

Pair Corralation between Yancoal Australia and Hub24

Assuming the 90 days trading horizon Yancoal Australia is expected to generate 2.29 times less return on investment than Hub24. In addition to that, Yancoal Australia is 1.22 times more volatile than Hub24. It trades about 0.04 of its total potential returns per unit of risk. Hub24 is currently generating about 0.12 per unit of volatility. If you would invest  2,705  in Hub24 on September 26, 2024 and sell it today you would earn a total of  4,348  from holding Hub24 or generate 160.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Yancoal Australia  vs.  Hub24

Yancoal Australia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 6 (%) 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.

Hub24

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hub24 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Hub24 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yancoal Australia and Hub24

The main advantage of trading using opposite Yancoal Australia and Hub24 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yancoal Australia position performs unexpectedly, Hub24 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 Hub24 will offset losses from the drop in Hub24's long position.

The idea behind Yancoal Australia and Hub24 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.