Correlation Between Pure Foods and Yancoal Australia

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

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

Diversification Opportunities for Pure Foods and Yancoal Australia

-0.17

Correlation Coefficient

Pure Foods  Yancoal Australia

Good diversification

The 3 months correlation between Pure and Yancoal is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pure Foods Tasmania and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and Pure Foods 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 Pure Foods Tasmania 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 Pure Foods i.e., Pure Foods and Yancoal Australia go up and down completely randomly.

Pair Corralation between Pure Foods and Yancoal Australia

Assuming the 90 days trading horizon Pure Foods Tasmania is expected to generate 4.78 times more return on investment than Yancoal Australia. However, Pure Foods is 4.78 times more volatile than Yancoal Australia. It trades about 0.08 of its potential returns per unit of risk. Yancoal Australia is currently generating about -0.08 per unit of risk. If you would invest  2.10  in Pure Foods Tasmania on December 22, 2024 and sell it today you would earn a total of  0.40  from holding Pure Foods Tasmania or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pure Foods Tasmania  vs.  Yancoal Australia

Pure Foods Tasmania

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Foods Tasmania are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pure Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Pure Foods and Yancoal Australia

The main advantage of trading using opposite Pure Foods and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Foods 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 Pure Foods Tasmania 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.