Correlation Between Exxaro Resources and China Shenhua

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

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

Diversification Opportunities for Exxaro Resources and China Shenhua

-0.05

Correlation Coefficient

Exxaro Resources  China Shenhua

Good diversification

The 3 months correlation between Exxaro and China is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Exxaro Resources Limited and China Shenhua Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shenhua Energy and Exxaro Resources 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 Exxaro Resources Limited are associated (or correlated) with China Shenhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shenhua Energy has no effect on the direction of Exxaro Resources i.e., Exxaro Resources and China Shenhua go up and down completely randomly.

Pair Corralation between Exxaro Resources and China Shenhua

If you would invest  1,050  in Exxaro Resources Limited on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Exxaro Resources Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

Exxaro Resources Limited  vs.  China Shenhua Energy

Exxaro Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Shenhua Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Shenhua Energy 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 Exxaro Resources and China Shenhua

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

The idea behind Exxaro Resources Limited and China Shenhua Energy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.