Correlation Between China Coal and New Hope

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

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

Diversification Opportunities for China Coal and New Hope

-0.69

Correlation Coefficient

China Coal  New Hope

Excellent diversification

The 3 months correlation between China and New is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding China Coal Energy and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope and China Coal 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 China Coal Energy are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of China Coal i.e., China Coal and New Hope go up and down completely randomly.

Pair Corralation between China Coal and New Hope

If you would invest  112.00  in China Coal Energy on October 10, 2024 and sell it today you would earn a total of  0.00  from holding China Coal Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

China Coal Energy  vs.  New Hope

China Coal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Coal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

New Hope

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Hope has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, New Hope is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Coal and New Hope

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

The idea behind China Coal Energy and New Hope 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.