Correlation Between SPORTING and China Coal

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

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

Diversification Opportunities for SPORTING and China Coal

0.27

Correlation Coefficient

SPORTING  China Coal

Modest diversification

The 3 months correlation between SPORTING and China is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING 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 SPORTING 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 SPORTING 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 SPORTING i.e., SPORTING and China Coal go up and down completely randomly.

Pair Corralation between SPORTING and China Coal

Assuming the 90 days trading horizon SPORTING is expected to generate 17.79 times less return on investment than China Coal. But when comparing it to its historical volatility, SPORTING is 1.11 times less risky than China Coal. It trades about 0.01 of its potential returns per unit of risk. China Coal Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  79.00  in China Coal Energy on October 7, 2024 and sell it today you would earn a total of  32.00  from holding China Coal Energy or generate 40.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SPORTING  vs.  China Coal Energy

SPORTING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 fragile 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 SPORTING and China Coal

The main advantage of trading using opposite SPORTING and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING 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 SPORTING 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.