Correlation Between Whitehaven Coal and Exxaro Resources

Can any of the company-specific risk be diversified away by investing in both Whitehaven Coal and Exxaro Resources 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 Exxaro Resources 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 Exxaro Resources Limited, you can compare the effects of market volatilities on Whitehaven Coal and Exxaro Resources 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 Exxaro Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitehaven Coal and Exxaro Resources.

Diversification Opportunities for Whitehaven Coal and Exxaro Resources

-0.18

Correlation Coefficient

Whitehaven Coal  Exxaro Resources

Good diversification

The 3 months correlation between Whitehaven and Exxaro is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal Limited and Exxaro Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Resources 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 Exxaro Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Resources has no effect on the direction of Whitehaven Coal i.e., Whitehaven Coal and Exxaro Resources go up and down completely randomly.

Pair Corralation between Whitehaven Coal and Exxaro Resources

If you would invest  414.00  in Whitehaven Coal Limited on September 2, 2024 and sell it today you would earn a total of  16.00  from holding Whitehaven Coal Limited or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Whitehaven Coal Limited  vs.  Exxaro Resources Limited

Whitehaven Coal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Whitehaven Coal Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Whitehaven Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Exxaro Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Whitehaven Coal and Exxaro Resources

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

The idea behind Whitehaven Coal Limited and Exxaro Resources Limited 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.