Correlation Between Yanzhou Coal and Whitehaven Coal

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

Diversification Opportunities for Yanzhou Coal and Whitehaven Coal

0.19

Correlation Coefficient

Yanzhou Coal  Whitehaven Coal

Average diversification

The 3 months correlation between Yanzhou and Whitehaven is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Yanzhou Coal i.e., Yanzhou Coal and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Yanzhou Coal and Whitehaven Coal

Assuming the 90 days horizon Yanzhou Coal Mining is expected to generate 0.75 times more return on investment than Whitehaven Coal. However, Yanzhou Coal Mining is 1.34 times less risky than Whitehaven Coal. It trades about 0.02 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about -0.02 per unit of risk. If you would invest  1,100  in Yanzhou Coal Mining on December 22, 2024 and sell it today you would earn a total of  14.00  from holding Yanzhou Coal Mining or generate 1.27% return on investment over 90 days.

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

Yanzhou Coal Mining  vs.  Whitehaven Coal Limited

Yanzhou Coal Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Whitehaven Coal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitehaven Coal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Whitehaven Coal 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 Whitehaven Coal

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

The idea behind Yanzhou Coal Mining and Whitehaven Coal Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.