Correlation Between PT Adaro and Yanzhou Coal

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

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

Diversification Opportunities for PT Adaro and Yanzhou Coal

0.25

Correlation Coefficient

PT Adaro  Yanzhou Coal

Modest diversification

The 3 months correlation between A64 and Yanzhou is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PT Adaro Energy 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 PT Adaro 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 PT Adaro Energy 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 PT Adaro i.e., PT Adaro and Yanzhou Coal go up and down completely randomly.

Pair Corralation between PT Adaro and Yanzhou Coal

Assuming the 90 days horizon PT Adaro is expected to generate 1.72 times less return on investment than Yanzhou Coal. In addition to that, PT Adaro is 1.28 times more volatile than Yanzhou Coal Mining. It trades about 0.01 of its total potential returns per unit of risk. Yanzhou Coal Mining is currently generating about 0.03 per unit of volatility. If you would invest  1,076  in Yanzhou Coal Mining on September 9, 2024 and sell it today you would earn a total of  34.00  from holding Yanzhou Coal Mining or generate 3.16% return on investment over 90 days.

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

PT Adaro Energy  vs.  Yanzhou Coal Mining

PT Adaro Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Yanzhou Coal Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yanzhou Coal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Adaro and Yanzhou Coal

The main advantage of trading using opposite PT Adaro and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Adaro 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 PT Adaro Energy 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 Commodity Directory module to find actively traded commodities issued by global exchanges.