Correlation Between Advanced Braking and Whitehaven Coal

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

By analyzing existing cross correlation between Advanced Braking Technology and Whitehaven Coal, you can compare the effects of market volatilities on Advanced Braking and Whitehaven 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 Advanced Braking with a short position of Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and Whitehaven Coal.

Diversification Opportunities for Advanced Braking and Whitehaven Coal

-0.44

Correlation Coefficient

Advanced Braking  Whitehaven Coal

Very good diversification

The 3 months correlation between Advanced and Whitehaven is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Advanced Braking i.e., Advanced Braking and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Advanced Braking and Whitehaven Coal

Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 1.44 times more return on investment than Whitehaven Coal. However, Advanced Braking is 1.44 times more volatile than Whitehaven Coal. It trades about -0.06 of its potential returns per unit of risk. Whitehaven Coal is currently generating about -0.11 per unit of risk. If you would invest  8.50  in Advanced Braking Technology on October 9, 2024 and sell it today you would lose (0.30) from holding Advanced Braking Technology or give up 3.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Advanced Braking Technology  vs.  Whitehaven Coal

Advanced Braking Tec

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Advanced Braking and Whitehaven Coal

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

The idea behind Advanced Braking Technology and Whitehaven Coal 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 Anywhere module to track or share privately all of your investments from the convenience of any device.