Correlation Between Consol Energy and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Consol Energy and IPG Photonics 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 IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consol Energy and IPG Photonics, you can compare the effects of market volatilities on Consol Energy and IPG Photonics 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 IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and IPG Photonics.
Diversification Opportunities for Consol Energy and IPG Photonics
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consol and IPG is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics 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 IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Consol Energy i.e., Consol Energy and IPG Photonics go up and down completely randomly.
Pair Corralation between Consol Energy and IPG Photonics
Given the investment horizon of 90 days Consol Energy is expected to generate 1.19 times more return on investment than IPG Photonics. However, Consol Energy is 1.19 times more volatile than IPG Photonics. It trades about 0.05 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.03 per unit of risk. If you would invest 10,291 in Consol Energy on August 24, 2024 and sell it today you would earn a total of 2,973 from holding Consol Energy or generate 28.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Consol Energy vs. IPG Photonics
Performance |
| Timeline |
| Consol Energy |
| IPG Photonics |
Consol Energy and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consol Energy and IPG Photonics
The main advantage of trading using opposite Consol Energy and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Consol Energy vs. Alliance Resource Partners | Consol Energy vs. Natural Resource Partners | Consol Energy vs. Hallador Energy | Consol Energy vs. NACCO Industries |
| IPG Photonics vs. Cohu Inc | IPG Photonics vs. Entegris | IPG Photonics vs. Veeco Instruments | IPG Photonics vs. Ultra Clean Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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