Correlation Between Peabody Energy and Yanzhou Coal

Can any of the company-specific risk be diversified away by investing in both Peabody Energy 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 Peabody Energy and Yanzhou Coal 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 Yanzhou Coal Mining, you can compare the effects of market volatilities on Peabody Energy 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 Peabody Energy with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peabody Energy and Yanzhou Coal.

Diversification Opportunities for Peabody Energy and Yanzhou Coal

0.84

Correlation Coefficient

Peabody Energy  Yanzhou Coal

Very poor diversification

The 3 months correlation between Peabody and Yanzhou is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy Corp 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 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 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 Peabody Energy i.e., Peabody Energy and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Peabody Energy and Yanzhou Coal

Considering the 90-day investment horizon Peabody Energy Corp is expected to under-perform the Yanzhou Coal. In addition to that, Peabody Energy is 1.47 times more volatile than Yanzhou Coal Mining. It trades about -0.27 of its total potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.09 per unit of volatility. If you would invest  1,160  in Yanzhou Coal Mining on November 28, 2024 and sell it today you would lose (123.00) from holding Yanzhou Coal Mining or give up 10.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.55%
Values	Daily Returns

Peabody Energy Corp  vs.  Yanzhou Coal Mining

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 March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Peabody Energy and Yanzhou Coal

The main advantage of trading using opposite Peabody Energy and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peabody Energy 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 Peabody Energy Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.