Correlation Between Ichor Coal and China Coal

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

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

Diversification Opportunities for Ichor Coal and China Coal

0.06

Correlation Coefficient

Ichor Coal  China Coal

Significant diversification

The 3 months correlation between Ichor and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ichor Coal NV and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy and Ichor 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 Ichor Coal NV are associated (or correlated) with China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of Ichor Coal i.e., Ichor Coal and China Coal go up and down completely randomly.

Pair Corralation between Ichor Coal and China Coal

Assuming the 90 days trading horizon Ichor Coal NV is expected to under-perform the China Coal. But the stock apears to be less risky and, when comparing its historical volatility, Ichor Coal NV is 1.3 times less risky than China Coal. The stock trades about -0.07 of its potential returns per unit of risk. The China Coal Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  52.00  in China Coal Energy on October 12, 2024 and sell it today you would earn a total of  55.00  from holding China Coal Energy or generate 105.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

Ichor Coal NV  vs.  China Coal Energy

Ichor Coal NV

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ichor Coal NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very fragile basic indicators, Ichor Coal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ichor Coal and China Coal

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

The idea behind Ichor Coal NV and China Coal 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.