Correlation Between Yanzhou Coal and NORWEGIAN AIR

Can any of the company-specific risk be diversified away by investing in both Yanzhou Coal and NORWEGIAN AIR 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 NORWEGIAN AIR 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 NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on Yanzhou Coal and NORWEGIAN AIR 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 NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yanzhou Coal and NORWEGIAN AIR.

Diversification Opportunities for Yanzhou Coal and NORWEGIAN AIR

-0.63

Correlation Coefficient

Yanzhou Coal  NORWEGIAN AIR

Excellent diversification

The 3 months correlation between Yanzhou and NORWEGIAN is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT 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 NORWEGIAN AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORWEGIAN AIR SHUT has no effect on the direction of Yanzhou Coal i.e., Yanzhou Coal and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between Yanzhou Coal and NORWEGIAN AIR

Assuming the 90 days trading horizon Yanzhou Coal Mining is expected to under-perform the NORWEGIAN AIR. But the stock apears to be less risky and, when comparing its historical volatility, Yanzhou Coal Mining is 1.35 times less risky than NORWEGIAN AIR. The stock trades about -0.13 of its potential returns per unit of risk. The NORWEGIAN AIR SHUT is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  94.00  in NORWEGIAN AIR SHUT on September 22, 2024 and sell it today you would lose (2.00) from holding NORWEGIAN AIR SHUT or give up 2.13% of portfolio value over 90 days.

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

Yanzhou Coal Mining  vs.  NORWEGIAN AIR SHUT

Yanzhou Coal Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Yanzhou Coal reported solid returns over the last few months and may actually be approaching a breakup point.

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yanzhou Coal and NORWEGIAN AIR

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

The idea behind Yanzhou Coal Mining and NORWEGIAN AIR SHUT 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 Stocks Directory module to find actively traded stocks across global markets.