Correlation Between Yanzhou Coal and MELIA HOTELS

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

Diversification Opportunities for Yanzhou Coal and MELIA HOTELS

-0.67

Correlation Coefficient

Yanzhou Coal  MELIA HOTELS

Excellent diversification

The 3 months correlation between Yanzhou and MELIA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS 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 MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of Yanzhou Coal i.e., Yanzhou Coal and MELIA HOTELS go up and down completely randomly.

Pair Corralation between Yanzhou Coal and MELIA HOTELS

Assuming the 90 days horizon Yanzhou Coal Mining is expected to under-perform the MELIA HOTELS. In addition to that, Yanzhou Coal is 2.0 times more volatile than MELIA HOTELS. It trades about -0.01 of its total potential returns per unit of risk. MELIA HOTELS is currently generating about 0.18 per unit of volatility. If you would invest  714.00  in MELIA HOTELS on October 8, 2024 and sell it today you would earn a total of  27.00  from holding MELIA HOTELS or generate 3.78% return on investment over 90 days.

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

Yanzhou Coal Mining  vs.  MELIA HOTELS

Yanzhou Coal Mining

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MELIA HOTELS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MELIA HOTELS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yanzhou Coal and MELIA HOTELS

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

The idea behind Yanzhou Coal Mining and MELIA HOTELS 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.