Correlation Between Consol Energy and African Agriculture
Can any of the company-specific risk be diversified away by investing in both Consol Energy and African Agriculture 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 Consol Energy and African Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consol Energy and African Agriculture Holdings, you can compare the effects of market volatilities on Consol Energy and African Agriculture 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 Consol Energy with a short position of African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and African Agriculture.
Diversification Opportunities for Consol Energy and African Agriculture
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Consol and African is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture and Consol Energy 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 Consol Energy are associated (or correlated) with African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of Consol Energy i.e., Consol Energy and African Agriculture go up and down completely randomly.
Pair Corralation between Consol Energy and African Agriculture
Given the investment horizon of 90 days Consol Energy is expected to generate 8.94 times less return on investment than African Agriculture. But when comparing it to its historical volatility, Consol Energy is 9.39 times less risky than African Agriculture. It trades about 0.05 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6.50 in African Agriculture Holdings on September 14, 2024 and sell it today you would lose (6.13) from holding African Agriculture Holdings or give up 94.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 80.4% |
| Values | Daily Returns |
Consol Energy vs. African Agriculture Holdings
Performance |
| Timeline |
| Consol Energy |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Consol Energy and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consol Energy and African Agriculture
The main advantage of trading using opposite Consol Energy and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| Consol Energy vs. Alliance Resource Partners | Consol Energy vs. Natural Resource Partners | Consol Energy vs. Hallador Energy | Consol Energy vs. NACCO Industries |
| African Agriculture vs. ReTo Eco Solutions | African Agriculture vs. Parker Hannifin | African Agriculture vs. Stepan Company | African Agriculture vs. Consol Energy |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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