Correlation Between Yanzhou Coal and Eastman Chemical

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

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

Diversification Opportunities for Yanzhou Coal and Eastman Chemical

-0.56

Correlation Coefficient

Yanzhou Coal  Eastman Chemical

Excellent diversification

The 3 months correlation between Yanzhou and Eastman is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Yanzhou 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 Yanzhou Coal Mining are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Yanzhou Coal i.e., Yanzhou Coal and Eastman Chemical go up and down completely randomly.

Pair Corralation between Yanzhou Coal and Eastman Chemical

Assuming the 90 days horizon Yanzhou Coal Mining is expected to under-perform the Eastman Chemical. In addition to that, Yanzhou Coal is 1.32 times more volatile than Eastman Chemical. It trades about -0.03 of its total potential returns per unit of risk. Eastman Chemical is currently generating about -0.03 per unit of volatility. If you would invest  8,689  in Eastman Chemical on December 22, 2024 and sell it today you would lose (353.00) from holding Eastman Chemical or give up 4.06% of portfolio value over 90 days.

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

Yanzhou Coal Mining  vs.  Eastman Chemical

Yanzhou Coal Mining

Risk-Adjusted Performance

Very Weak

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

Eastman Chemical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Yanzhou Coal and Eastman Chemical

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

The idea behind Yanzhou Coal Mining and Eastman Chemical 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 Transaction History module to view history of all your transactions and understand their impact on performance.