Correlation Between Exxaro Resources and Yanzhou Coal

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

Diversification Opportunities for Exxaro Resources and Yanzhou Coal

-0.57

Correlation Coefficient

Exxaro Resources  Yanzhou Coal

Excellent diversification

The 3 months correlation between Exxaro and Yanzhou is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Exxaro Resources Limited 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 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 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 Exxaro Resources i.e., Exxaro Resources and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Exxaro Resources and Yanzhou Coal

If you would invest  127.00  in Yanzhou Coal Mining on August 30, 2024 and sell it today you would earn a total of  8.00  from holding Yanzhou Coal Mining or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Exxaro Resources Limited  vs.  Yanzhou Coal Mining

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.

Yanzhou Coal Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Yanzhou Coal may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Exxaro Resources and Yanzhou Coal

The main advantage of trading using opposite Exxaro Resources and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxaro Resources 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 Exxaro Resources Limited 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.