Correlation Between BII Railway and Yanzhou Coal

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Can any of the company-specific risk be diversified away by investing in both BII Railway 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 BII Railway and Yanzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Yanzhou Coal Mining, you can compare the effects of market volatilities on BII Railway 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 BII Railway with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Yanzhou Coal.

Diversification Opportunities for BII Railway and Yanzhou Coal

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between BII and Yanzhou is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation 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 BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Yanzhou Coal go up and down completely randomly.

Pair Corralation between BII Railway and Yanzhou Coal

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.84 times more return on investment than Yanzhou Coal. However, BII Railway Transportation is 1.19 times less risky than Yanzhou Coal. It trades about 0.27 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.18 per unit of risk. If you would invest  2.60  in BII Railway Transportation on October 12, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BII Railway Transportation  vs.  Yanzhou Coal Mining

 Performance 
       Timeline  
BII Railway Transpor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BII Railway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Yanzhou Coal Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Yanzhou Coal Mining 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BII Railway and Yanzhou Coal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BII Railway and Yanzhou Coal

The main advantage of trading using opposite BII Railway and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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