Correlation Between Yancoal Australia and Invion

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

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

Diversification Opportunities for Yancoal Australia and Invion

-0.38

Correlation Coefficient

Yancoal Australia  Invion

Very good diversification

The 3 months correlation between Yancoal and Invion is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Invion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invion 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 Invion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invion has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and Invion go up and down completely randomly.

Pair Corralation between Yancoal Australia and Invion

Assuming the 90 days trading horizon Yancoal Australia is expected to generate 10.76 times less return on investment than Invion. But when comparing it to its historical volatility, Yancoal Australia is 12.17 times less risky than Invion. It trades about 0.1 of its potential returns per unit of risk. Invion is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Invion on September 23, 2024 and sell it today you would lose (4.00) from holding Invion or give up 13.33% of portfolio value over 90 days.

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

Yancoal Australia  vs.  Invion

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.

Invion

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invion are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yancoal Australia and Invion

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

The idea behind Yancoal Australia and Invion 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.