Correlation Between Peabody Energy and Yancoal Australia

Can any of the company-specific risk be diversified away by investing in both Peabody Energy and Yancoal Australia 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 Peabody Energy and Yancoal Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Peabody Energy Corp and Yancoal Australia, you can compare the effects of market volatilities on Peabody Energy and Yancoal Australia 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 Peabody Energy with a short position of Yancoal Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peabody Energy and Yancoal Australia.

Diversification Opportunities for Peabody Energy and Yancoal Australia

0.45

Correlation Coefficient

Peabody Energy  Yancoal Australia

Very weak diversification

The 3 months correlation between Peabody and Yancoal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy Corp and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and Peabody Energy 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 Peabody Energy Corp are associated (or correlated) with Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of Peabody Energy i.e., Peabody Energy and Yancoal Australia go up and down completely randomly.

Pair Corralation between Peabody Energy and Yancoal Australia

Considering the 90-day investment horizon Peabody Energy Corp is expected to under-perform the Yancoal Australia. But the stock apears to be less risky and, when comparing its historical volatility, Peabody Energy Corp is 1.11 times less risky than Yancoal Australia. The stock trades about -0.18 of its potential returns per unit of risk. The Yancoal Australia is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Yancoal Australia on December 29, 2024 and sell it today you would lose (97.00) from holding Yancoal Australia or give up 22.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Peabody Energy Corp  vs.  Yancoal Australia

Peabody Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peabody Energy Corp 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Yancoal Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yancoal Australia 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Peabody Energy and Yancoal Australia

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

The idea behind Peabody Energy Corp and Yancoal Australia 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.