Correlation Between CITY OFFICE and Yanzhou Coal

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

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

Diversification Opportunities for CITY OFFICE and Yanzhou Coal

-0.48

Correlation Coefficient

CITY OFFICE  Yanzhou Coal

Very good diversification

The 3 months correlation between CITY and Yanzhou is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining and CITY OFFICE 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 CITY OFFICE REIT are associated (or correlated) with Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Yanzhou Coal go up and down completely randomly.

Pair Corralation between CITY OFFICE and Yanzhou Coal

Assuming the 90 days horizon CITY OFFICE is expected to generate 1.05 times less return on investment than Yanzhou Coal. But when comparing it to its historical volatility, CITY OFFICE REIT is 1.35 times less risky than Yanzhou Coal. It trades about 0.02 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  993.00  in Yanzhou Coal Mining on October 24, 2024 and sell it today you would lose (18.00) from holding Yanzhou Coal Mining or give up 1.81% of portfolio value over 90 days.

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

CITY OFFICE REIT  vs.  Yanzhou Coal Mining

CITY OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITY OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CITY OFFICE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Yanzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yanzhou Coal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CITY OFFICE and Yanzhou Coal

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

The idea behind CITY OFFICE REIT and Yanzhou Coal Mining 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.