Correlation Between Yanzhou Coal and PT Bayan

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

By analyzing existing cross correlation between Yanzhou Coal Mining and PT Bayan Resources, you can compare the effects of market volatilities on Yanzhou Coal and PT Bayan 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 Yanzhou Coal with a short position of PT Bayan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yanzhou Coal and PT Bayan.

Diversification Opportunities for Yanzhou Coal and PT Bayan

0.51

Correlation Coefficient

Yanzhou Coal  PT Bayan

Very weak diversification

The 3 months correlation between Yanzhou and BNB is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining and PT Bayan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bayan Resources and Yanzhou 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 Yanzhou Coal Mining are associated (or correlated) with PT Bayan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bayan Resources has no effect on the direction of Yanzhou Coal i.e., Yanzhou Coal and PT Bayan go up and down completely randomly.

Pair Corralation between Yanzhou Coal and PT Bayan

Assuming the 90 days trading horizon Yanzhou Coal Mining is expected to generate 1.24 times more return on investment than PT Bayan. However, Yanzhou Coal is 1.24 times more volatile than PT Bayan Resources. It trades about 0.16 of its potential returns per unit of risk. PT Bayan Resources is currently generating about 0.13 per unit of risk. If you would invest  79.00  in Yanzhou Coal Mining on September 18, 2024 and sell it today you would earn a total of  33.00  from holding Yanzhou Coal Mining or generate 41.77% return on investment over 90 days.

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

Yanzhou Coal Mining  vs.  PT Bayan Resources

Yanzhou Coal Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Yanzhou Coal reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bayan Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bayan Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Bayan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yanzhou Coal and PT Bayan

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

The idea behind Yanzhou Coal Mining and PT Bayan Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.