Correlation Between Natural Resource and Yancoal Australia

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

By analyzing existing cross correlation between Natural Resource Partners and Yancoal Australia, you can compare the effects of market volatilities on Natural Resource and Yancoal Australia 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 Natural Resource with a short position of Yancoal Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Resource and Yancoal Australia.

Diversification Opportunities for Natural Resource and Yancoal Australia

-0.27

Correlation Coefficient

Natural Resource  Yancoal Australia

Very good diversification

The 3 months correlation between Natural and Yancoal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Natural Resource Partners and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and Natural Resource 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 Natural Resource Partners are associated (or correlated) with Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of Natural Resource i.e., Natural Resource and Yancoal Australia go up and down completely randomly.

Pair Corralation between Natural Resource and Yancoal Australia

Considering the 90-day investment horizon Natural Resource Partners is expected to generate 0.72 times more return on investment than Yancoal Australia. However, Natural Resource Partners is 1.38 times less risky than Yancoal Australia. It trades about 0.0 of its potential returns per unit of risk. Yancoal Australia is currently generating about -0.09 per unit of risk. If you would invest  10,663  in Natural Resource Partners on December 29, 2024 and sell it today you would lose (163.00) from holding Natural Resource Partners or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Natural Resource Partners  vs.  Yancoal Australia

Natural Resource Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Resource Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Natural Resource is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Yancoal Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yancoal Australia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Natural Resource and Yancoal Australia

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

The idea behind Natural Resource Partners and Yancoal Australia 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.