Correlation Between Yancoal Australia and Sims

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

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

Diversification Opportunities for Yancoal Australia and Sims

0.2

Correlation Coefficient

Yancoal Australia  Sims

Modest diversification

The 3 months correlation between Yancoal and Sims is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims 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 Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and Sims go up and down completely randomly.

Pair Corralation between Yancoal Australia and Sims

Assuming the 90 days trading horizon Yancoal Australia is expected to generate 1.08 times more return on investment than Sims. However, Yancoal Australia is 1.08 times more volatile than Sims. It trades about 0.08 of its potential returns per unit of risk. Sims is currently generating about -0.02 per unit of risk. If you would invest  588.00  in Yancoal Australia on September 26, 2024 and sell it today you would earn a total of  54.00  from holding Yancoal Australia or generate 9.18% return on investment over 90 days.

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

Yancoal Australia  vs.  Sims

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.

Sims

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sims has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Sims is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Yancoal Australia and Sims

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

The idea behind Yancoal Australia and Sims 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.