Correlation Between Colonial Coal and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Colonial Coal and Dow Jones 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 Colonial Coal and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colonial Coal International and Dow Jones Industrial, you can compare the effects of market volatilities on Colonial Coal and Dow Jones 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 Colonial Coal with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colonial Coal and Dow Jones.
Diversification Opportunities for Colonial Coal and Dow Jones
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Colonial and Dow is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Colonial Coal International and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Colonial 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 Colonial Coal International are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Colonial Coal i.e., Colonial Coal and Dow Jones go up and down completely randomly.
Pair Corralation between Colonial Coal and Dow Jones
Assuming the 90 days horizon Colonial Coal International is expected to generate 7.25 times more return on investment than Dow Jones. However, Colonial Coal is 7.25 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 84.00 in Colonial Coal International on October 25, 2024 and sell it today you would earn a total of 43.00 from holding Colonial Coal International or generate 51.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colonial Coal International vs. Dow Jones Industrial
Performance |
| Timeline |
Colonial Coal and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Colonial Coal International
Pair trading matchups for Colonial Coal
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Colonial Coal and Dow Jones
The main advantage of trading using opposite Colonial Coal and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colonial Coal position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Colonial Coal vs. Coronado Global Resources | Colonial Coal vs. Alpha Metallurgical Resources | Colonial Coal vs. Warrior Met Coal | Colonial Coal vs. Ramaco Resources |
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Check out your portfolio center.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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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