Correlation Between Yanzhou Coal and Indo Tambangraya

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

Diversification Opportunities for Yanzhou Coal and Indo Tambangraya

-0.26

Correlation Coefficient

Yanzhou Coal  Indo Tambangraya

Very good diversification

The 3 months correlation between Yanzhou and Indo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining 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 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 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 Yanzhou Coal i.e., Yanzhou Coal and Indo Tambangraya go up and down completely randomly.

Pair Corralation between Yanzhou Coal and Indo Tambangraya

Assuming the 90 days horizon Yanzhou Coal Mining is expected to generate 0.59 times more return on investment than Indo Tambangraya. However, Yanzhou Coal Mining is 1.7 times less risky than Indo Tambangraya. It trades about -0.03 of its potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.06 per unit of risk. If you would invest  1,128  in Yanzhou Coal Mining on December 29, 2024 and sell it today you would lose (53.00) from holding Yanzhou Coal Mining or give up 4.7% of portfolio value over 90 days.

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

Yanzhou Coal Mining  vs.  Indo Tambangraya Megah

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. In spite of fairly strong basic indicators, Yanzhou Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Yanzhou Coal and Indo Tambangraya

The main advantage of trading using opposite Yanzhou Coal and Indo Tambangraya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yanzhou Coal 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 Yanzhou Coal Mining 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.