Correlation Between New Hope and China Coal

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

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

Diversification Opportunities for New Hope and China Coal

-0.69

Correlation Coefficient

New Hope  China Coal

Excellent diversification

The 3 months correlation between New and China is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding New Hope 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 New Hope 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 New Hope 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 New Hope i.e., New Hope and China Coal go up and down completely randomly.

Pair Corralation between New Hope and China Coal

If you would invest  112.00  in China Coal Energy on October 10, 2024 and sell it today you would earn a total of  0.00  from holding China Coal Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

New Hope  vs.  China Coal Energy

New Hope

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 nearly stable basic indicators, China 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 New Hope and China Coal

The main advantage of trading using opposite New Hope and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Hope 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 New Hope 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.