Correlation Between Yancoal Australia and Indo Tambangraya

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

By analyzing existing cross correlation between Yancoal Australia and Indo Tambangraya Megah, you can compare the effects of market volatilities on Yancoal Australia and Indo Tambangraya 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 Indo Tambangraya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and Indo Tambangraya.

Diversification Opportunities for Yancoal Australia and Indo Tambangraya

0.5

Correlation Coefficient

Yancoal Australia  Indo Tambangraya

Very weak diversification

The 3 months correlation between Yancoal and Indo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Indo Tambangraya Megah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Tambangraya Megah 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 Indo Tambangraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Tambangraya Megah has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and Indo Tambangraya go up and down completely randomly.

Pair Corralation between Yancoal Australia and Indo Tambangraya

Assuming the 90 days horizon Yancoal Australia is expected to under-perform the Indo Tambangraya. In addition to that, Yancoal Australia is 1.2 times more volatile than Indo Tambangraya Megah. It trades about -0.09 of its total potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.06 per unit of volatility. If you would invest  335.00  in Indo Tambangraya Megah on December 29, 2024 and sell it today you would lose (50.00) from holding Indo Tambangraya Megah or give up 14.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Yancoal Australia  vs.  Indo Tambangraya Megah

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 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.

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Yancoal Australia and Indo Tambangraya

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

The idea behind Yancoal Australia and Indo Tambangraya Megah 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.