Correlation Between Whitehaven Coal and Yancoal Australia

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

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

Diversification Opportunities for Whitehaven Coal and Yancoal Australia

0.66

Correlation Coefficient

Whitehaven Coal  Yancoal Australia

Poor diversification

The 3 months correlation between Whitehaven and Yancoal is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal Limited and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and Whitehaven Coal 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 Whitehaven Coal Limited 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 Whitehaven Coal i.e., Whitehaven Coal and Yancoal Australia go up and down completely randomly.

Pair Corralation between Whitehaven Coal and Yancoal Australia

Assuming the 90 days horizon Whitehaven Coal Limited is expected to under-perform the Yancoal Australia. But the stock apears to be less risky and, when comparing its historical volatility, Whitehaven Coal Limited is 1.23 times less risky than Yancoal Australia. The stock trades about -0.11 of its potential returns per unit of risk. The Yancoal Australia is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Yancoal Australia on December 4, 2024 and sell it today you would lose (18.00) from holding Yancoal Australia or give up 4.8% of portfolio value over 90 days.

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

Whitehaven Coal Limited  vs.  Yancoal Australia

Whitehaven Coal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitehaven Coal Limited 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.

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 nearly stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Whitehaven Coal and Yancoal Australia

The main advantage of trading using opposite Whitehaven Coal and Yancoal Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitehaven Coal 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 Whitehaven Coal Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.