Correlation Between Yanzhou Coal and WOOLWORTHS

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

Diversification Opportunities for Yanzhou Coal and WOOLWORTHS

0.5

Correlation Coefficient

Yanzhou Coal  WOOLWORTHS

Very weak diversification

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

Pair Corralation between Yanzhou Coal and WOOLWORTHS

Assuming the 90 days horizon Yanzhou Coal Mining is expected to under-perform the WOOLWORTHS. In addition to that, Yanzhou Coal is 1.59 times more volatile than WOOLWORTHS. It trades about -0.18 of its total potential returns per unit of risk. WOOLWORTHS is currently generating about -0.13 per unit of volatility. If you would invest  1,990  in WOOLWORTHS on October 26, 2024 and sell it today you would lose (190.00) from holding WOOLWORTHS or give up 9.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Yanzhou Coal Mining  vs.  WOOLWORTHS

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 fragile 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.

WOOLWORTHS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WOOLWORTHS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Yanzhou Coal and WOOLWORTHS

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

The idea behind Yanzhou Coal Mining and WOOLWORTHS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.