Correlation Between Alliance Resource and Yanzhou Coal

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

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

Diversification Opportunities for Alliance Resource and Yanzhou Coal

-0.37

Correlation Coefficient

Alliance Resource  Yanzhou Coal

Very good diversification

The 3 months correlation between Alliance and Yanzhou is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Resource Partners 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 Alliance Resource 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 Alliance Resource Partners 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 Alliance Resource i.e., Alliance Resource and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Alliance Resource and Yanzhou Coal

Given the investment horizon of 90 days Alliance Resource Partners is expected to generate 1.0 times more return on investment than Yanzhou Coal. However, Alliance Resource is 1.0 times more volatile than Yanzhou Coal Mining. It trades about 0.06 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.03 per unit of risk. If you would invest  2,524  in Alliance Resource Partners on December 30, 2024 and sell it today you would earn a total of  142.00  from holding Alliance Resource Partners or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Alliance Resource Partners  vs.  Yanzhou Coal Mining

Alliance Resource

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Alliance Resource may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Yanzhou Coal Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yanzhou Coal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Yanzhou Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alliance Resource and Yanzhou Coal

The main advantage of trading using opposite Alliance Resource and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Resource 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 Alliance Resource Partners 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.