Correlation Between Indo Tambangraya and Yanzhou Coal

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

By analyzing existing cross correlation between Indo Tambangraya Megah and Yanzhou Coal Mining, you can compare the effects of market volatilities on Indo Tambangraya 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 Indo Tambangraya with a short position of Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Tambangraya and Yanzhou Coal.

Diversification Opportunities for Indo Tambangraya and Yanzhou Coal

0.36

Correlation Coefficient

Indo Tambangraya  Yanzhou Coal

Weak diversification

The 3 months correlation between Indo and Yanzhou is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah 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 Indo Tambangraya 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 Indo Tambangraya Megah 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 Indo Tambangraya i.e., Indo Tambangraya and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Yanzhou Coal

Assuming the 90 days horizon Indo Tambangraya Megah is expected to under-perform the Yanzhou Coal. In addition to that, Indo Tambangraya is 2.31 times more volatile than Yanzhou Coal Mining. It trades about -0.06 of its total potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.06 per unit of volatility. If you would invest  113.00  in Yanzhou Coal Mining on December 30, 2024 and sell it today you would lose (6.00) from holding Yanzhou Coal Mining or give up 5.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Indo Tambangraya Megah  vs.  Yanzhou Coal Mining

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah 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.

Yanzhou Coal Mining

Risk-Adjusted Performance

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 nearly stable technical indicators, Yanzhou Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Indo Tambangraya and Yanzhou Coal

The main advantage of trading using opposite Indo Tambangraya and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Tambangraya 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 Indo Tambangraya Megah 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.