Correlation Between Yancoal Australia and INVITATION HOMES

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

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

Diversification Opportunities for Yancoal Australia and INVITATION HOMES

-0.03

Correlation Coefficient

Yancoal Australia  INVITATION HOMES

Good diversification

The 3 months correlation between Yancoal and INVITATION is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and Yancoal Australia 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 Yancoal Australia are associated (or correlated) with INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and INVITATION HOMES go up and down completely randomly.

Pair Corralation between Yancoal Australia and INVITATION HOMES

Assuming the 90 days trading horizon Yancoal Australia is expected to generate 2.6 times more return on investment than INVITATION HOMES. However, Yancoal Australia is 2.6 times more volatile than INVITATION HOMES DL. It trades about 0.03 of its potential returns per unit of risk. INVITATION HOMES DL is currently generating about 0.02 per unit of risk. If you would invest  274.00  in Yancoal Australia on October 11, 2024 and sell it today you would earn a total of  75.00  from holding Yancoal Australia or generate 27.37% return on investment over 90 days.

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

Yancoal Australia  vs.  INVITATION HOMES DL

Yancoal Australia

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

INVITATION HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yancoal Australia and INVITATION HOMES

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

The idea behind Yancoal Australia and INVITATION HOMES DL 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .