Correlation Between Yancoal Australia and China Coal

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Can any of the company-specific risk be diversified away by investing in both Yancoal Australia 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 Yancoal Australia and China Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yancoal Australia and China Coal Energy, you can compare the effects of market volatilities on Yancoal Australia 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 Yancoal Australia with a short position of China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and China Coal.

Diversification Opportunities for Yancoal Australia and China Coal

YancoalChinaDiversified AwayYancoalChinaDiversified Away100%
0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Yancoal and China is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia 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 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 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 Yancoal Australia i.e., Yancoal Australia and China Coal go up and down completely randomly.

Pair Corralation between Yancoal Australia and China Coal

Assuming the 90 days trading horizon Yancoal Australia is expected to generate 1.35 times more return on investment than China Coal. However, Yancoal Australia is 1.35 times more volatile than China Coal Energy. It trades about -0.03 of its potential returns per unit of risk. China Coal Energy is currently generating about -0.11 per unit of risk. If you would invest  381.00  in Yancoal Australia on November 18, 2024 and sell it today you would lose (24.00) from holding Yancoal Australia or give up 6.3% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Yancoal Australia  vs.  China Coal Energy

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15YA1 CVV
       Timeline  
Yancoal Australia 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.43.53.63.73.83.94
China Coal Energy 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days China Coal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.051.11.151.2

Yancoal Australia and China Coal Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.14-3.1-2.06-1.02-0.01640.971.962.943.93 0.050.060.070.080.09
JavaScript chart by amCharts 3.21.15YA1 CVV
       Returns  

Pair Trading with Yancoal Australia and China Coal

The main advantage of trading using opposite Yancoal Australia and China Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yancoal Australia 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 Yancoal Australia 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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