Correlation Between Consol Energy and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Consol Energy and RBC Bearings 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 RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consol Energy and RBC Bearings Incorporated, you can compare the effects of market volatilities on Consol Energy and RBC Bearings 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 RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and RBC Bearings.
Diversification Opportunities for Consol Energy and RBC Bearings
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consol and RBC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Consol Energy i.e., Consol Energy and RBC Bearings go up and down completely randomly.
Pair Corralation between Consol Energy and RBC Bearings
Given the investment horizon of 90 days Consol Energy is expected to generate 1.05 times less return on investment than RBC Bearings. In addition to that, Consol Energy is 1.33 times more volatile than RBC Bearings Incorporated. It trades about 0.27 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.37 per unit of volatility. If you would invest 28,035 in RBC Bearings Incorporated on September 1, 2024 and sell it today you would earn a total of 5,476 from holding RBC Bearings Incorporated or generate 19.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consol Energy vs. RBC Bearings Incorporated
Performance |
| Timeline |
| Consol Energy |
| RBC Bearings |
Consol Energy and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consol Energy and RBC Bearings
The main advantage of trading using opposite Consol Energy and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| Consol Energy vs. Alliance Resource Partners | Consol Energy vs. Natural Resource Partners | Consol Energy vs. Hallador Energy | Consol Energy vs. NACCO Industries |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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