Correlation Between Corporate Travel and China Coal

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

By analyzing existing cross correlation between Corporate Travel Management and China Coal Energy, you can compare the effects of market volatilities on Corporate Travel and China Coal 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 Corporate Travel with a short position of China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Travel and China Coal.

Diversification Opportunities for Corporate Travel and China Coal

0.19

Correlation Coefficient

Corporate Travel  China Coal

Average diversification

The 3 months correlation between Corporate and China is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Travel Management and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy and Corporate Travel 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 Corporate Travel Management are associated (or correlated) with China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of Corporate Travel i.e., Corporate Travel and China Coal go up and down completely randomly.

Pair Corralation between Corporate Travel and China Coal

Assuming the 90 days trading horizon Corporate Travel Management is expected to generate 1.57 times more return on investment than China Coal. However, Corporate Travel is 1.57 times more volatile than China Coal Energy. It trades about 0.35 of its potential returns per unit of risk. China Coal Energy is currently generating about -0.15 per unit of risk. If you would invest  765.00  in Corporate Travel Management on October 24, 2024 and sell it today you would earn a total of  105.00  from holding Corporate Travel Management or generate 13.73% return on investment over 90 days.

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

Corporate Travel Management  vs.  China Coal Energy

Corporate Travel Man

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Travel Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corporate Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Coal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Coal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Corporate Travel and China Coal

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

The idea behind Corporate Travel Management and China Coal Energy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.