Correlation Between China Coal and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both China Coal and NYSE Composite 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 China Coal and NYSE Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Coal Energy and NYSE Composite, you can compare the effects of market volatilities on China Coal and NYSE Composite 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 China Coal with a short position of NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Coal and NYSE Composite.
Diversification Opportunities for China Coal and NYSE Composite
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and NYSE is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Coal Energy and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite and China 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 China Coal Energy are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of China Coal i.e., China Coal and NYSE Composite go up and down completely randomly.
Pair Corralation between China Coal and NYSE Composite
Assuming the 90 days horizon China Coal Energy is expected to generate 10.27 times more return on investment than NYSE Composite. However, China Coal is 10.27 times more volatile than NYSE Composite. It trades about 0.22 of its potential returns per unit of risk. NYSE Composite is currently generating about 0.02 per unit of risk. If you would invest 101.00 in China Coal Energy on March 6, 2024 and sell it today you would earn a total of 29.00 from holding China Coal Energy or generate 28.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
China Coal Energy vs. NYSE Composite
Performance |
Timeline |
China Coal and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |